You can basically create a mini Linux environment of any distro that you can access through the terminal. You can set it to share your home folder, our create a new home folder just for that mini environment.
Behind the scenes Distrobox is creating and managing containers through Podman or Docker. You could technically achieve the same thing by manually setting up Podman containers, Distrobox just makes it very easy to create and maintain those containers with the correct permissions. It also has useful tools where you could install an app in a Distrobox container, but then add that app to your host OS app list.
This makes it especially useful for immutable OSs. Instead of adding packages to your base OS, which should be kept as minimal as possible, you can just install them in a Distrobox, so your host’s root filesystem is unaffected.