How is this created?

I have seen alot of these free phpbb forum hosting sites. Well i want to create something like this accept its not a forum but a website.

Look at the service this site offers;

You can choose a subdomain and with the click of a button via an installation link, the whole forum / i want a website is set up.

How is this done?

Probably via modrewrite, a database-driven forum and some duplication of directories and files

Those site are really all you need to use mod_rewrite. 😉