It is Application based. MS provides a tool called ORCA, which is a total pain to use, but is afree way to do it. Other options are Installshield(Macrovision), and WISE. Both allow you to go through a gui to creat them , then provide you a way to build on them. Really easy to use. Now if you want to spend the time, you can transform with Properties passed to the MSI.
What program is it you want to transform?