Let’s look at what the function does for your example input:
transpose [[1,2,3],[4,5,6],[7,8,9]]
<=>
(map head [[1,2,3],[4,5,6],[7,8,9]]) : (transpose (map tail [[1,2,3],[4,5,6],[7,8,9]]))
<=>
[1,4,7] : (transpose [[2,3],[5,6],[8,9]])
<=>
[1,4,7] : (map head [[2,3],[5,6],[8,9]]) : (transpose (map tail [[2,3],[5,6],[8,9]]))
<=>
[1,4,7] : [2,5,8] : (transpose [[3],[6],[9]])
<=>
[1,4,7] : [2,5,8] : (map head [[3],[6],[9]]) : (transpose (map tail [[3],[6],[9]]))
<=>
[1,4,7] : [2,5,8] : [3, 6, 9] : (transpose [[], [], []])
<=>
[1,4,7] : [2,5,8] : [3, 6, 9] : [] -- because transpose ([]:_) = []
<=>
[[1,4,7],[2,5,8],[3,6,9]]
Note that the order in which I chose to reduce the terms, is not the same as the evaluation order haskell will use, but that does not change the result.
Edit: In response to your edited question:
is this
(map head x)creating a list of the head elements of each list?
Yes, it is.