You can call them emulators, or you can call them virtual machines, or you can call them compatibility environments. The point is that they run PPC code on PPCs, so the don't have to emulate an entire CPU architecture in software. This is also the reason why the project has stalled, as moving it to the Intel Macs would be a huge task.

http://en.wikipedia.org/wiki/Mac-on-Mac is a port of http://en.wikipedia.org/wiki/Mac-on-Linux