This is a three-tier all grain system. Top is the HLT (Hot Liquor Tank), the middle is the MLT (Mash/Lauter Tun), and the bottom is the boil kettle.
Hot water for the mash and sparge are heated in the top. Gravity brings that down to the mash tun where the grains are mashed, gravity will drain that into the boil kettle, while more water from the HLT sparges the grains. When that is all done, the wort in the kettle is boiled just like any other extract or AG batch.
Edit: Like I mentioned the reason it is high up is to allow gravity to drain it. The flat ones you might have seen use pumps to move the water and wort around.