Interesting.
Now that sure explains why it shows up as a download. It literally is an install.
I tried two games. Your 4MB text game demo. That seemed to work from the "install" folder. Another game that was 15MB as a web version and 30MB as a download version. I "installed" the web version. This one did not work from the folder. The engine did not support running from the file location.
The Itch app is a browser, btw. A modified Chromium if I recall correctly. I needed to run that other game with the Itch app.
For that matter, the Steam app also contains a modified browser which was the reason why they discontinued older windows, because the browser basis they used did no longer support it. But Steam has no browser games as such. So how do you pack your Steam version? Is it exported with some barebone browser or how is it run on the player's system?