That means the image file only grows as more content is put inside, rather than be pre-allocated to the full capacity of the virtual disk. (Installer images are typically read-only). (Typically a partition table with a single partition).
They can hold a partition table, and therefore contain more than one volume.However DMG images offer a LOT more functionalities than traditional ISO images: They play a similar role to “ISO” images on other platforms, in the sense that they can be used to clone medias or can be mounted/unmounted as a virtual disks. Disk Images have always been popular on the Mac.