It's a fully emulated PC: CPU, memory, hard drive, …
The CPU especially took me very long to get right with all the details to run Windows 98.
The code is here: https://github.com/copy/v86
The code is here: https://github.com/copy/v86
https://github.com/copy/v86/commit/159f565de4dd99bff9b46c45a...
Nope, Windows 98 undefined instruction.
PS: Just came across the HN discussion around the said x86 emulator.