Is it not generating HTML on the server to be served to the client?
No, it generates the code that creates the DOM, sets the application state based on the user's setting, and updates the webapp to resume working in a consistent state.
It basically sends a frozen instance of a full blown JavaScript application.
What you’re describing is, in my opinion, an overly complicated form of dynamically rendering HTML on the backend.
That's because you're oblivious to the problem domain,and thus you're falling back to the unrelated but similar sounding things you're familiar with to fill in the void of your understanding of the actual problem.
Anyway, that’s my opinion on the matter
My point is that your opinion is a misinformed one,and really doesn't hold up to scrutiny.