Completely it's own from scratch. It's a very simple, relative to full Linux or other OS, kernel/hypervisor. It's built to load what it calls the Dom0 system, which it gives a communication channel to to start up other virtual systems that it calls DomU. This in theory lets you use any OS as the Dom0 for initializing everything (Linux, *BSD, even Windows I think) as long as there's some kind of support for that communications channel to tell the Xen kernel to start up another system.
