It doesn’t happen like it did in the Age Of Sail, where ships hulls were made of wood, at least not usually - but it still sort of happens. What is usually meant by that phrase for a modern steel ship is that the entire ship is scoured by fire to the point where nothing inside the hull or superstructure is left untouched or usable and only the parts below the waterline (and not even all of those) are even vaguely surviving as the water on the hull provides some relief from radiated heating. The basic hull and superstructure are still there (usually) but everything inside is gone - and due to heating the hull may no longer be safe to reuse.
That makes sense...