macOS Monterey VHD Parallels Download

I am wanting to run a Monterey VM on my M1 MacBook Pro. As far as I can tell, the only way to do this is via the "download macOS" option in the free systems section of Parallels.

My question is, where does this VHD come from? Is it created by Parallels or is this downloaded directly from Apple?

If from Parallels, does anyone know if Apple has approved this method of installation or is this similar to the Windows 11 situation (i.e. MS says its not a supported configuration).

Thanks for any help!
VineRider