The subscale sets the zero
Turning the subscale knob moves the level the altimeter measures from. Set QNH and it reads your height above mean sea level. Set 1013 hPa (1013.2 hPa in the rules) and it reads pressure altitude, your height above the level where the pressure is 1013 hPa.
The altimeter is essentially an aneroid barometer. The difference is the scale.
A pressure datum which when set on the sub-scale of a sensitive altimeter causes the altimeter to indicate vertical displacement from that datum.
QNH is an atmospheric pressure adjusted to sea level and measured in hPa or millibars so that when QNH is set the altimeter will read elevation above mean sea level (AMSL).
Put simply, pressure altitude is the height above the ISA datum of 1,013 hPa.
New Zealand's rules define pressure altitude in terms of the standard atmosphere.
Pressure altitude means an atmospheric pressure, expressed in terms of altitude, which corresponds to that pressure in the standard atmosphere
PREDICT FIRST
You are parked at an aerodrome 1,000 ft above sea level. Today's QNH is 1003 hPa. You wind the subscale to 1013 hPa. What does the altimeter read?