It downloads the packages you need during installation, instead of using the contents of the ISO as a kind of "offline repository". Depending on the distro and installer, it often downloads more up-to-date packages compared to a full ISO, so you don't have to update the system instantly after installation.

The end result is exactly the same.

The difference is that you can install an iso on a computer without an internet connection. The normal iso contains copies of most or all relevant packages. Although maybe not all of the latest and most up to date ones, the bulk are enough to get you started. The net install, like the name suggests, requires an internet connection to download packages for anything except the most minimal, bare-bones configuration. The connection would hopefully be nearly as fast if not faster than the iso and be guaranteed to have the latest updates available which the iso may not. While such a fast connection is usually taken for granted nowadays, it is not always available in some situations and locations, it is not always convenient, and some hardware may have difficulty with the network stack that may be difficult to resolve before a full system is installed or may require specialized tools to configure or diagnose that are only available as packages.

In almost all cases, the netinst works great and is a more efficient and sensible way to install. However, if it doesn't work well in your particular situation, the iso will be more reliable, with some downsides and redundancy that wastes disk space and time.

Things like windows updates and some large and complex software programs and systems often come with similar "web" and "offline" installers that make the same distinctions for the same reasons. The tradeoff is the same, as both options have valid use cases.