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It's QEMU emulation. It's slow. It also segfaults a lot. I am able to run a select few containers on it, but I needed to sort out native arm64 for the vast majority.

The main reason for segfaults is that not all syscalls (syscalls on linux are different per architecture - not even 32bit and 64bit x86 use the same) are implemented in a 100% compatible way.

Yes, this is exactly what Apple has done - created Rosetta that handles Linux ELF binaries, translates code and syscalls.

Yes, Docker on macOS can switch from qemu-user to this. It uses the same binfmt mechanism, so it should be mostly a drop-in replacement.

This is only available in combination with Virtualization.framework, but Docker is already migrating from Hypervisor.framework to Virtualization.framework.