More precisely, what it does is start a new init system on a pseudofilesystem, starts an sshd chrooted to that new system, and lets you then login there, where

More precisely, what it does is start a new init system on a pseudofilesystem, starts an sshd chrooted to that new system, and lets you then login there, where you can then, if you want, umount the original root fs, wipe it, install a new os, then reboot the system.