Disclaimer: I have not served on a faculty hiring committee, so this answer is not based on first-hand experience. What is expected of a recommendation letter also greatly depends on the field, country, and whether the department is teaching-focused or research-focused and how "elite" it is.
Academic recommendation letters are quite different from non-academic reference letters.
A good academic recommendation letter should be detailed. Simply saying "spore234 was my student and they were the most smartest, and hardest working student ever" is not going to cut it. In particular, it should discuss your research, its significance, and what you contributed to each project. This is particularly important if your research is collaborative -- recommendation letters can elucidate what you contributed relative to your coauthors. It should also discuss teaching and service if applicable.
That is probably why your supervisor is asking you for a draft -- you are more familiar with your work than she/he is and can thus provide more detail. Hopefully your supervisor will heavily edit your draft (please encourage her/him to do so), but you can help provide details to include in it. Don't underestimate how little your supervisor may remember about what exactly you contributed to this or that project, or even what the project was. By drafting the letter, you are providing a reminder.
Furthermore, recommendation letters sometimes include a comparison to other students. E.g., "I have advised 10 PhD students during my career and spore234's research contributions would place her in the top two. Spore234 is comparable to my former student X, who has gone on to a successful career as a now-tenured faculty at the University of Y." This is still a subjective assessment, but it's a more precise way to express an opinion than simply spouting superlatives. (I would be hesitant to draft such a paragraph about myself, but perhaps you can let your supervisor fill in the blanks.)
Of course, a recommendation letter should also include the usual pleasantries, some detail about the recommender and how they know the subject, and some forward-looking discussion of future potential.