If you have only ever used a traditional sportsbook, betting exchanges are the least familiar part of this whole process, and that is worth explaining plainly rather than assuming it is obvious.
How a traditional sportsbook works
A sportsbook sets its own odds on every outcome and takes the other side of every bet you place. That price already has the book''s margin built into it, sometimes called the vig or juice, which is how the book profits regardless of who wins. You are always betting against the house, and the house''s price already accounts for its own edge.