xkcd

Wood does shrink while it dries, and that is the reason why a "2x4" is actually 1.5x3.5, but you're missing a lot of detail in there.

To make a tree into boards, first a lumberjack fells the tree and bucks off the branches. It is then taken to a sawmill where a big clumsy saw slices it into kind of rectangular shapes. I will gloss over some nuance here about the algorithm chosen to do that and how it relates to the growth rings to produce boards of different qualities. You now have green boards, VERY wet. If you were to build something from these boards, as they dried they would warp and twist and pull the assembly apart. So it has to be dried.

At commercial scale, this is done by stacking the boards with spacers in between so air can circulate through the pile and letting it sit outside for a few months, and then the piles are taken into a kiln and heated for a couple weeks. The weight of the stack, or perhaps straps holding the stack together, has kept the boards relatively straight, but they will have warped a little. Before they're used for much, they have to be more precisely cut so they are straight, square and true.

Woodworkers making fine furniture tend to buy their lumber rough cut and mill it themselves, so that the lumber is as flat, straight and square as possible. Let all warping happen while the board is rough and mill it as a first step in building so that the pieces are very precise, and then the finished assembly holds itself true. Woodworkers buy wood per unit volume; it's usually priced per board foot. A board foot is 1 foot long, 1 foot wide and 1 inch thick, or 144 cubic inches. A 1 inch thick, 6 inch wide, 8 foot long board is 4 board feet. Checking out at the lumber yard requires a bit of middle school geometry homework.

Carpenters building houses or sheds used to do the same. In the early 20th century, lumber companies shipping lumber long distances by rail started shipping wood pre-milled. It doesn't really matter if the boards are a little warped; the worst boards in a stack can be cut into the smaller pieces you need, the better ones used whole for studs or plates. Pre-milling the boards at the sawmill means that it's cheaper and more efficient to ship the lumber, the sawmill now has the sawdust/shavings/chips to make particle board, OSB and other engineered lumber products out of, and the carpenter gets a commodity product he can buy and use rather than a raw material that needs further processing. Because they're all the same size, they're sold at a price each. It was a true 2 inches by 4 inches in the kiln, and the milling has been done for you.