In a classic on-premise scenario, a company manages and maintains its own datacenter.
This company must invest in servers, storage capacity, software, hire IT staff or subcontractors to purchase, manage and upgrade all equipment and licenses and so on.
The datacenter must be designed to meet peak demand, even if workloads sometimes decrease and these resources remain idle.
In a traditional IaaS model, a company calls on a Cloud service provider to offer these services by hosting hardware and software in a "cloud infrastructure".
The company no longer needs to acquire and manage its own equipment, nor space to host that equipment, and the cost shifts to a pay-per-use model.
In fact when the company needs fewer resources, it pays less. Conversely, as it grows, it can commission additional computing resources and other technologies in a matter of minutes.