What does pygame.sprite.Group() do

Read the documentation of pygame.sprite.Group.

pygame.sprite.Group.update() and pygame.sprite.Group.draw() are methods which are provided by pygame.sprite.Group.
The former delegates the to the update method of the contained pygame.sprite.Sprites – you have to implement the method.

pygame.sprite.Group.update()

Calls the update() method on all Sprites in the Group.

The later uses the image and rect attributes of the contained pygame.sprite.Sprites to draw the objects – you have to ensure that the pygame.sprite.Sprites have the required attributes

pygame.sprite.Group.draw()

Draws the contained Sprites to the Surface argument. This uses the Sprite.image attribute for the source surface, and Sprite.rect for the position.

The Sprites in the Groups can be removed and thus destroyed by calling pygame.sprite.Sprite.kill. When the object is no longer referenced, it is destroyed:

The Sprite is removed from all the Groups that contain it. This won’t change anything about the state of the Sprite. It is possible to continue to use the Sprite after this method has been called, including adding it to Groups.

See also Sprite Groups

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Minimal example:

import pygame

class Player(pygame.sprite.Sprite):
    def __init__(self, center_pos):
        super().__init__() 
        self.image = pygame.Surface((40, 40))
        self.image.fill((255, 255, 0))
        self.rect = self.image.get_rect(center = center_pos)

class Bullet(pygame.sprite.Sprite):
    def __init__(self, center_pos):
        super().__init__() 
        self.image = pygame.Surface((20, 10))
        self.image.fill((0, 255, 255))
        self.rect = self.image.get_rect(center = center_pos)
    
    def update(self):
        self.rect.x += 10
        if self.rect.right > 300:
            self.kill()

pygame.init()
window = pygame.display.set_mode((400, 300))
clock = pygame.time.Clock()

player = Player((25, window.get_height() // 2))
all_sprites = pygame.sprite.Group(player)

run = True
while run:
    clock.tick(60)
    for event in pygame.event.get():
        if event.type == pygame.QUIT:
            run = False
        if event.type == pygame.KEYDOWN:
            if event.key == pygame.K_SPACE:
                all_sprites.add(Bullet(player.rect.center))

    all_sprites.update()
    print(len(all_sprites))

    window.fill(0)
    pygame.draw.rect(window, (255, 0, 0), (300, 0, 10, window.get_height()))
    all_sprites.draw(window)
    pygame.display.flip()

pygame.quit()
exit()