I get the feeling it's basically an old-fashioned application server like Wildfly or Tomcat. So the developer doesn't worry about system-d config or whatever, but just adds their application files to a folder. Of course someone needs to maintain the application server, however it's deployed, but it detangles things a bit. I personally think this makes no sense unless someone else hosts the application server. Maybe in an enterprise context of some sort. Otherwise this feels like a tried-and-failed idea.
The difference is Wasm provides the security boundary so it can be multi tenanted. The real magic is that wasi will be hostable anywhere much like Docker containers are today, but it's much more efficient than docker containers because there are less overheads and startup latency.