Welcome to the community @zhandosweb!
To answer your questions quickly:
Now I will try and explain as I understand it. You can find better information in the docs though at: https://docs.frontity.org/#how-does-frontity-work
Frontity is headless and uses Wordpress as the CMS. Ordinarily, Wordpress operates through PHP where when someone requests the website, the PHP processes the request on the server and sends the requested site back to the user in HTML.
Frontity on the other hand, is built using React, but not on the PHP server side. It runs headless on its own Node server where it packages the web app that you build and prepares it to be sent to the requested user in HTML in the smallest form factor possible. There are quite a few benefits to this, such as increased load times, etc. Now the content of the website such as pages, blog posts, etc. are loaded using Wordpress’s REST API to take the data from Wordpress and to show it on the Front-End. No need to generate a new website as the content is always available on the REST API.
In short, you are free to scale as you need your front-end while keeping it completely free from your Wordpress (back-end).
Again, someone from the team may be able to explain better than I can. Another good resource is: https://blog.frontity.org/seo-for-headless-wordpress-themes/