Your explanation is clever and could account for most of the behavior of the product. Certainly the environments, rapid booting, and even hot resizing.

What's missing, however, is how they do machine state snapshots (not supported in any container system afaik). I know Xen/VMWare support these, but if they are running atop AWS they will not have access to the hypervisor. I can imagine kludgily running another hypervisor atop AWS, but there would appear to be a more clever solution.