Not virtualized doesn't mean bare metal. I think the term would make more sense to you if you worked through "Linux from Scratch." There are things between embedded and running a full Linux OS.
What would those things be? Maybe it's a continuum but concepts are not continuous. Surely there are various degrees of OS but if it's anything that manages the "bare" hardware it's something like an OS. Arguably you could also call Xen Dom0 an operating system.