First try to make the archive a little bit big so you can see the actual process.
create 2 folders that contains multiple big files
for example program1 program2 and program3 folders.
Now let's say we want to extract program 2.
You will notice that the installer displaying program1 folder and it's content and program 2 and 3 but it only extract program2 actually.
Extracting the whole archive takes as much as time to extract one folder.
It's like unpacking the whole archive on the fly but not letting the unwanted files to be copied to the destination folder.
Hope i clarified what i meant.
