Imagine a game where only 2 people bet. One bets $100 on the favorite, the other bets $100 on the underdog.

At that point, the house has $200, and the two bettors each have $0.

Once the game is played, the house has to pay the winner. How much they pay depends on the odds given at the time of the bet, and the odds might be slightly different depending on whether the favorite or the underdog won (or covered), but for illustration purposes, let's say the odds for this game means the winner won $80. That means the house gives that bettor their initial $100 back plus their $80 in winnings.

Bettor 1: started with $100, ends up with $0
Bettor 2: started with $100, ends up with $180
House: started with $0, ends up with $20.