src.rpm are source rpms meaning they contain the source file and a spec file which is used to build the rpm to match your system. What it does with that commmand is it extracts the contents to /usr/src/redhat/ Specs and other directories there. Then you can use the rpmbuild command to build the rpm from the spec file.
rpmbuild -ba file.spec
Or to shorten the process use the rpmbuild command directly to the src.rpm file like so.
rpmbuild --recompile -- rebuild file.src.rpm
When it finishes completely with no errors then the rpm will be in /usr/src/redhat/RPMS