No, it doesn't really blow away anything. Just some copying around and over. Preserving all the malware, viruses, rootkits and stuff.
Except of course, licenses and copy protection. That stuff is gone and you have to buy it all again, since the install-id is regenerated.
You can choose "keep my files" or "remove everything", the remove everything version + "clean files" does actually remove everything. https://support.microsoft.com/en-us/windows/reset-your-pc-0e...
I guess I'm not surprised with how frequently "reinstall Windows" is offered as a solution, that there is now some lighter version of that. But really I was talking about obtaining/creating installation media and reinstalling from scratch.