No it can't create MSI packages but it is very vercital and can wrap exiting MSI package and other installers without much hassle. We use it for the following primary reasons.
Small package size - With large scale deployments every byte makes a difference especially for off-site deployments.
Self Contained - Permits installs on systems were the MS installer may be corrupted and were VB scripts are not running or disabled.
Macros - Permit for dynamic compiling of the installer for different SKU's without maintaining multiple installer scripts.
Personally I hate the built in compression of MSI packages. I typically perform an administrative install of an MSI package to extract it then use NSIS to use LZMA compression to dramatically reduce the package size.
If you still want to make MSI packages I recommend taking a look at WiX
Microsoft used it for packaging Office 2007