It works by running QEMU inside Linux inside a modified JSLinux, and then running Win2K inside QEMU.
JSLinux was modified to incorporate AMD's hardware-assisted virtualization instructions/extensions, so that QEMU could use KVM. This means that actual x86 emulation gets done in JavaScript layer, and you have (JavaScript (JSLinux(QEMU)) <-> Win2K) instead of (JavaScript(JSLinux(QEMU(Win2K))))), which would be... well I tried running Mini vMac (Mac 128K emulator) inside Basilisk II (PowerPC Mac emulator) one day... it was pretty much unusable, even though Classic Mac OS was designed for a 7.8MHz CPU.
So basically this wouldn't have been possible without implementing virtualization. Despite the fact that said virtualization is actually fake, and it's really emulation.