Does erase all content and settings delete and reinstall macOS ?

No. I did that recently and it was way to fast to have time to reinstall. Also, see the following from Erase all content and settings on Mac - Apple Support

macOS Monterey includes Erase All Content and Settings, a way to quickly and securely erase all of your settings, data, and apps, while maintaining the operating system currently installed.

No, they are two separate operations. You can Boot into the Recovery volume (boot with the Command + R keys held down  - Intel Macs) or  (How to Boot an M1 Mac into Recovery Mode) select Disk Utility and erase the entire drive, not must one volume. Then quit Disk Utility and reinstall the system. That will remove all user data and settings for a factory fresh start.

The system installed will be the system you were running at the time of erasure.

To add a little context to what has been said already: in Big Sur and Monterey (and soon, Ventura), the OS is installed in a separate, sealed volume. When booted from this volume, it is not possible at all to modify the system. Hence, the need of usefulness of reinstalling the OS becomes vastly reduced.

Only the data volume is changed. So, instead of erasing the whole drive completely, it is much faster and easier to do this "erase content and settings" - the OS remains exactly as is, the data volume is erased, and then system restarts as if it had been installed anew (the usual first setup steps appear); but it is much much faster.