That's because Win95 is running on top of Bochs. Bochs simulates every x86 instruction in software. Getting Bochs to run on Apple Watch is itself impressive!
It's unfortunate that qemu probably can't run on iOS due to its JIT code generation. qemu (without KVM acceleration) doesn't run nearly as fast as native, but it runs orders of magnitude faster than Bochs.
tcg (the qemu code generator) does have an interpreter - you could probably run qemu on iOS with that - though it would obviously be a lot slower than the jit.
The entire OS is slow so whilst it is emulated some responsibility lies with Apple.
It's a pretty poor effort on Apple's part to have an ARMv7 CPU at 520Mhz with a PowerVR GPU be completely incapable of rendering basic animations without dropping frames, minute long startup times for some apps and general sluggishness.