In some cases, the buyer simply needs to accumulate cash.... Lets say the 3.5 percent required for a FHA sale. So in that case' a rent to own contract can be part of getting there. In other cases the seller "acts like a bank" and if the contract is well written after x months rent (maybe 360 of them) then the renter will complete the deal and then will receive title. I gave two extreme here and the develi I in the details. These types of agreement are best written or reviewed by attorneys.
You find a house, agree to purchase the house at a price a year or two from now. You put down a security deposit that you will loose if you don't buy when the contract says and you pay a monthly amount as rent each month. On top of the rent you will add an option fee of $100-$200 or whatever you agree on and the owner keeps that option fee each month to add to the deposit as your down payment when you purchase in a year or two.
The problems occur when you can not buy in a year or two for whatever reason. The owner then can keep your option money and deposit and out you go. Its better for the seller than you. What makes it worse is that prices have been going down and in a year the values could be lower, a bank might not even allow you to borrow then if the purchase price is too high which will force you to put down even more money or walk away.
I would urge you to avoid rent to own and just save and get in a position to buy when you can.