The ISO images includes everything needed to install all (or most) of the toolboxes, including installation control files and directory archives and an executable that knows how to install everything.
The first level installer is an executable that knows how to download the files needed for installation. One of the things it downloads early is an executable that knows how to install everything given the installation files. The first executable only needs to be large enough to know how to connect to Mathworks and authenticate, find out what the user is entitled to, and download appropriate parts.
