The tank is mostly metal, with a corrosion-resistant liner inside. There is also a layer of insulation to prevent heat loss. (Oil or gas) combustion-style heaters have an exhaust vent similar to that of a car. Older models may even have a chimney.
The dip tube transports water from tank top to bottom, where thermostat-controlled heating ensures that the water reaches its target temperature. The heated water rises to the tank’s top, where it enters the home’s hot water pipes.