Cayley theorem says every group is isomorphic to a group of permutations.
How do I understand this?
I have thought it through group actions. When Permuatation group acts on a set of objects it just permutes those objects. Similarly if any group acts on a set of objects it just permuates them.
Is my intuition correct?
What you have said is not really more than (half of) the definition of a group action.
Cayley's Theorem states that a group $G$ acts faithfully on a very specific set in a natural way, namely on its underlying set. The action is defined as the group multiplication. Here, an action $G \to \mathrm{Sym}(X)$ is called faithful when it is injective.