The container is filled with growing medium, often peat moss. Watch any YouTube video on air layering to see the concept. Works well on fig trees, other tropical trees, and things that root easily.
I had no luck with my efforts on crabapple trees, but do have an elm tree growing that it worked very well on.
The advantage to air layering over cuttings is that you can use a 5 foot long branch, getting it to root near the main trunk, and then you have a tree that's already 5 foot tall.