The Windows Installer format (informally known as MSI) is an archiving format from Microsoft, used as installation files for Windows software. It is based on Microsoft Compound File format.
Various versions of Windows come standard with the installer program which recognizes this format and will automatically launch the installer when you click on one, so it has replaced self-extracting .exe files containing archived installers for the installation of many programs. An archive file of this sort includes the various files that are part of the software package being installed, with metadata about how it should be structured, what registry changes need to be made, and so on.
It is more-or-less the successor to Cabinet (.cab) format, and some MSI files contain CAB files as part of their payload.