Basically, it’s a shell script prepended to a compressed archive of some sort, such as a tar archive. You use the tail or sed command on yourself (the $0 variable in Bourne shell) to strip off the shell script at the front and pass the rest to your unarchiver.
For example, create the following script as self-extracting:
#!/bin/sh -e
sed -e '1,/^exit$/d' "$0" | tar xzf - && ./project/Setup
exit
The sed command above deletes all lines from the first line of the file to the first one that starts with “exit”, and then passes the rest on through. If what starts immediately after the “exit” line is a tar file, the tar command will extract it. If that’s successful, the ./project/Setup file (presumably extracted from the tarball) will be executed.
Then:
mkdir project
echo "#!/bin/sh" > project/Setup
echo "echo This is the setup script!" >> project/Setup
chmod +x project/Setup
tar czf - project >> self-extracting
Now, if you get rid of your old project directory, you can run self-extracting and it will extract that tar file and run the setup script.