When paying with Apple Card installments, what happens to the available credit on my card? I chose monthly installments to buy an Apple Pencil and an iPad, but my card looks as if I’ve paid for the items in full.

The benefit of Monthly Installments is that it is interest-free. If you use your available credit for something that isn't through Monthly Installments and don't pay in full when the first payment is due, you are charged interest (at. pretty high rate) for the balance. See: How to avoid or lower Apple Card interest charges - Apple Support

The total amount of the purchase (i.e., the price of the items you bought) is what you owe, no matter whether you are paying with interest-free monthly installments or making payments for purchases where interest is charged. Your Available Balance is reduced by the full amount of the purchase in either case.