It’s running under a normal hyper visor based VM, no different from any other hardware supported hypervisor (think VMware, docker, parallels, etc). There is no x86 involves.
Hypervisor virtualization is still virtualization and still has a performance penalty. And if you actually watched the video you’ll see a very large portion of it is specifically devoted to x86 emulation. Including running several win32 binaries and DOSBox.
