Yes it is a CD image. You can either burn it on CD if you have a CD-writer and a programs like Alcohol 120% (not free) or you can mount the image using a program like Daemon Tools (free).
Get Daemon Tools here.
http://www.abandonia.com/main.php?nav=programs
Once you have either the CD-Rom or the image mounted you run DOSBox (you need to able to run something like 20,000 cycles to make it run smoothly) to install the game. Make sure you mount the correct CD-ROM drive in DOSBox. Deamon Tools makes a virtual CD-ROM drive on your computer with a sepperate letter designation from your own CD-ROM drive so find out which it is so you can mount that one in DOSBox.