tar -xvzf files.tar.gz
tar collected all the files into one package, files.tar. The gzip program applied compression, hence the gz extension. So the command does a couple things:
f: this must be the last flag of the command, and the tar file must be immediately after. It tells tar the name and path of the compressed file.z: tells tar to decompress the archive using gzipx: tar can collect files or extract them. x does the latter.v: makes tar talk a lot. Verbose output shows you all the files being extracted.
To extract into a custom folder, add the -C option with a folder name of your choice:
tar -xvzf community_images.tar.gz -C some_custom_folder_name