If 'Uoutput' is the voltage at the drain of M1, it will be V1 divided by R1 and the Rds of M1 . Probably just a much smaller version of V1.
It doesn't generate PWM at all.
Swap V1 and V2 over to begin with, or make V2 switch faster and slower to get a feel for the very rough idea of pwm. The mosfet has to switch on and off to pass more or less of a varying supply voltage to maintain a constant voltage or current at the drain, sensing feedback at the source would be easier. Mosfet switching between time on to time off has to be based on a feedback signal that senses Vout and compares it to a reference value.