How does docker Images and Layers work?

Actually I am new to the Docker ecosystem and I am trying to understand how exactly does a container work on a base image? Does the base image gets loaded into the container?

I have been through Docker docs where its said that a read write container layer is formed on top of a image layer which is the container layer, but what I am confused about is image is immutable, right? Then where is the image running, is it inside the Docker engine in the VM and how the container is actually coming into play?

how exactly does a container work on a base image? Does the base image gets loaded into the container?

Docker containers wrap a piece of software in a complete filesystem that contains everything needed to run: code, runtime, system tools, system libraries – anything that can be installed on a server.

Like FreeBSD Jails and Solaris Zones, Linux containers are self-contained execution environments -- with their own, isolated CPU, memory, block I/O, and network resources (Using CGROUPS kernel feature) -- that share the kernel of the host operating system. The result is something that feels like a virtual Machine, but sheds all the weight and startup overhead of a guest operating system.

This being said Each distribution has it's own official docker image (library), that is shipped with minimal binaries, Considered docker's best practices and it's ready to build on.

I am confused about is image is immutable, right? where is the image running, is it inside the Docker engine in the VM and how the container is actually coming into play?

Docker used to use AUFS, still uses it on debian and uses AUFS like file systems like overlay and etc on other distributions. AUFS provides layering. Each Image consists of Layers, These layers are read only. Each container has a read/write layer on top of its image layers. Read only layer are shared between containers so you will have storage space savings. Container will see the union mount of all image layers + read/write layer.