Yeah I've also tried to understand this. Tried looking for blog posts on what VS Code is doing but couldn't find one. Can someone point out if there's any?
One thing is that they rely on DOM reflow - the automatic, dynamic sizing of elements - as little as possible: nearly everything in the VSCode UI has a fixed size and position. Reflow is arguably the most costly feature of the web when it comes to dynamic apps (though also one of its most valuable features).