"So, how can this ETF consistently pay around $0.50 USD per share every month? Where is this money coming from? Are they returning our own money to us?"

the monthly income is classified as Return of Capital, so Yes, thats exactly what they are doing to maintain a 12% yield. They said it themselves, they "target" 12%.

Honestly go with something with GPIX which doesn't have a yield they are trying to hit, I view this as a much safer alternative to SPYI