Sorry, I should have been more specific. It takes the search parameters that your guests have selected (dates, number of guests), adds your additional fees like cleaning + extra guest fees, and averages those costs over the number of days, then applies any weekly discounts you have set up. Thus, the nightly rate will show higher for one night than it does for multiple nights.
Some hosts use a high cleaning fee as a strategy to discourage short days and encourage longer ones.