First with the FET switched on. The on-resistance of a FET can be very low, even as low as a few mΩs for high current ones, but let's take an average FET with a 1 Ω on-resistance, and a 10 kΩ pull-up resistor. Let's say \$V_S\$ = 5 V. The FET pulls the output level almost to ground; it forms a resistor divider with R, so that
\$ V_{OUT} = \dfrac{R_{DS(ON)}}{R + R_{DS(ON)}} V_S = \dfrac{1 \Omega}{10000 \Omega + 1 \Omega} 5 V = 0.5 mV \$
So with the FET on we have as good as zero.
Next with the FET off. Then there's no current through R, and since the voltage across R = R \$\times\$ current (Ohm's Law) the voltage is also zero. If \$V_S\$ is 5 V, and there's no voltage difference across R, then \$V_{OUT}\$ also must be 5 V.
Just like the FET isn't a perfect switch when closed it isn't a perfect switch when open either. There's a small leakage current, say up to 1 µA. That will cause (again due to Ohm) a voltage drop of 1 µA \$\times\$ 10 kΩ = 10 mV across the resistor, and the output will be 4.99 V instead of 5 V. The leakage current is the reason why you shouldn't choose R too high. If R would be 1 MΩ then the voltage drop would be 1 V and that may be too much.
So it works with the resistor. What if we omit it? With the FET on the output woill be drawn to ground, but with the FET off the output would be floating if our FET was a perfect switch, so it would be undefined. With the leakage current it might still pull the output low, if the input impedance of the load was very high. So the resistor is needed to define the level when the FET is off.