unsquashfs tool to extract files from an image file

Just to be clear: linux tool unsquashfs(1) takes as input the name of a squashfs filesystem **image** file. In other words the file we pass to it is a "bit by bit" image of a squashfs filesystem stored within blocks of an disk (or RAM disk). Basically it *extracts* files and directories within the squashfs filesystem into a directory on the "host system" passed to it by its name. Is the above correct? Thanks.