I have installed butler and logged in with my itch.io account.

I am not familiar with software like this so the documentation is confusing to me.

You mean this?

https://itch.io/docs/wharf/file-formats/patches.html

Run this command in your terminal:

butler extract "path/to/file.pwr" "path/to/destination_folder"

you need to specify the files and the destination folder, like you'd do with a .zip