It's all over-collateralized loans. So if I want $50k cash to buy a car, I can deposit $100k of ETH to borrow $50k USDC. As ETH price changes, your loan has a "health" score and if it gets below a certain threshold you can get liquidated if you don't start repaying the loan.

The reason for involving crypto in this scenario is so you don't have to sell your crypto assets. This will be more useful going forward as platforms allow users to use NFTs as collateral for example.