It doesn't really do this much now, because rootless makes it hard to actually modify what the base image consists of (at least, without the "magic double reboot" system updates do nowadays, that uses the recovery partition's kernel to update the code-signing whitelist. And that process is really only set up for a linear progression of system updates; it has no allowance for optional components that add their own whitelists.)

Instead, Server.app does two things:

1. similar to Xcode, Server.app ships with a POSIX env inside it (nothing chroot/jail-y going on; it just has programs ./configure'd with that env as their --prefix, and some stub programs in the base system that exec their /Applications/Server.app equivalents if they exist);

2. it updates [non-rootless-protected] configuration files, that activate previously-inactive parts of the base system, like opendirectoryd and racoon.

It is a bit more than a regular app but I don't think it's installing anything into the system. There are UNIX folder structures inside the app bundle that the system can use. But if you delete the app you don't have any server processes anymore.