There could be one of two things that you are seeing:
1. People are pointing their domians to the blogspot urls, and using "domain masking". What this does is serve up a framed enclosure and puts the content of the blogspot inside of the frame. This is generally a free service provided by the registrar.
2. You are most likely seeing people host their blogs on their own server. In your blogger control panel you can fill out many options, such as server info/ftp info and things like that under the settings>publishing tab. There you can adjust what server the content will be uploaded to. This is not free and is dependant upon your server/hosting costs.
If you are using this blog to do any type of search engine promotion to gain traffic - you may want to go with #2. Personally, I would use a different blog platform than blogger if you have any technical knowledge because the others all have a lot more features than blogger (from a usability/organization standpoint). But, if you have very limited technical knowledge, blogger is very easy to set up on your own domain/hosting.