For the Arduino Nano to be used as an ISP programmer you need to upload the ArduinoISP sketch.
We can create our own board definition that tells the Arduino IDE to use all available memory and use appropriate fuse settings. The different Arduino definitions are stored in a file called boards.txt.
You can use another Arduino board like the Uno or Nano can be used as a free and easy ISP programmer to burn the bootloader back onto the target chip, instead of requiring a separate commercial AVR programmer.