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In the video it was said Issues allows users to submit and track bugs etc but same Issues page was used to create a read me file. I find that confusing.
I get what you mean, but Alyson didn't create a README file in this video. She submitted an Issue that says she should create a README file. Kinda like if a store had a suggestion box and you put a note in there that said, "You all should put a sign up outside," or whatever. You're not putting the sign up, you're suggesting they should.
It makes it more confusing because she's essentially writing an Issue to herself. What she's really doing is creating a to-do list for herself.