The file probably did not actually have a
.rar extension. It probably showed no extension, and when you double-clicked it, it opened in WinRAR. That looks like this:
And when you opened it, it probably looked something like this (the files inside may have been different, though, as it appears you downloaded the alternate CD):
This happens when these two conditions both hold:
Windows is configured to Hide extensions for known file types, which is the case by default.
It's not necessary to change this setting, but if you want to do so, Folder Options is in Control Panel (in Windows Vista and later, it's in the Appearance and Personalization category).
WinRAR is installed, and configured to open ISO images.
It's not necessary to change this either, but if you want to after installing WinRAR, open WinRAR and go to Options > Settings... and click the Integration tab. You can adust file associations there. You can also adjust them in the Default Programs applet in the Control Panel (it's in the Programs category).
This is unrelated to how you obtained the ISO image. The problem is that you're opening the ISO image as an archive. You don't have to use WinRAR on the ISO image. Instead...
If you want to install Ubuntu alongside Windows (or replace Windows with Ubuntu):
Burn the ISO image to a CD/DVD or write it to a USB flash drive, then boot from that. See:
If you want to install Ubuntu inside Windows using Wubi:
You can install a Wubi system from a pre-downloaded ISO image by downloading
wubi.exe from the Ubuntu website (this is a very small file), then make an empty folder, and put
wubi.exe and your ISO image (which, as explained above, may not show any file extension) in that folder. Then run
wubi.exe. Make sure
wubi.exe and the ISO image file are for the same version number of Ubuntu.
As a related but somewhat different situation, sometimes users confuse an ISO image and the program that opens it. See Ubuntu image download either downloaded or opened Roxio instead. Why? (In contrast, here the confusion is between an ISO image and another file type opened by the program set to open ISOs.)