At its core, a is a software utility (often a GUI wrapper for command-line tools like ps2-fpkg ) that takes a standard PS2 disc image (ISO, BIN/CUE, or dump.iso ) and wraps it into a .pkg file. A PKG file is the standard installation package format for the PlayStation 4 (and PS3).
The converter takes your ISO, strips out unnecessary padding, and merges it with a generic or game-specific config file. ps2 to ps4 pkg converter