Seems pretty simple to me, it's a hardware virtualization, these arcade systems are largely just based off of locked-down versions of Windows or Linux because PCs are cheaper than elaborate dedicated components, so it makes the games think they're running on the x86 arcade system when it's really running on your PC, the same way Nintendont makes your games think they're running on a Gamecube when it's really running on a Wii or Wii U. They share hardware similar enough to make one imitate the other in a way separate from emulation.
Don't quote me on that though.
Don't quote me on that though.