If I understand correctly, Urbit is a new OS kernel and application layer, with a new weird FP language on a weird VM. Its first app is a crypto ID system.
Yes, it's a new bytecode format and some application-layer stuff to go along with it (like some networking tools). This is almost impossible to determine because they intentionally made this as obscure as possible. A relatively clear explanation of what Urbit is and why they made it so intentionally confusing is available on the UR blog. I don't remember the title; something about computers in 2020.
it's a minimal turing-complete function, built out into a higher-level language and functional, deterministic operating system (arvo) that is virtualized on a host OS. arvo runs an encrypted overlay network that is decentralized and federated. individual instances have combination identities/routing addresses that are finite and cryptographically owned (built on ethereum at the moment, though perhaps not forever).
you could say its first app is a decentralized chat & social software suite. everything built on the OS gets the decentralized network 'for free'; apps become protocols.
It's not an actual "kernel". It's an application that hides all hardware specifics from applications that run inside it. Or something like that, I have no idea.
It's an actual kernel the same way a virtual machine is an actual machine.
To unpack that: a virtual machine could be a real machine, it just happens to instead by a software-hosted emulation thereof. There's a hardware JVM in your SIM card, for an example.
arvo (the kernel) is the same deal: there's nothing stopping someone from implementing the syscalls it uses (used to be seven of them IIRC), writing some drivers, and running it on bare metal.
But that's a lot of work, and the Unix-hosted virtual kernel works well enough. The whole thing may be fairly compared with inferno, which is a hosted plan9 which runs on a VM.