I'm puzzled about how this would help with 3D graphics. Wouldn't Windows still be running the same way in a VM, regardless of where its files are located?
The idea's that you can boot into "native" Windows when you need to do stuff with 3D graphics, but boot into virtualized Windows when you don't. This way, you can use the same install for both purposes, allowing you to save storage space and avoid having two different Windows installs that you have to setup and maintain.
Yes. It's implemented using a hardware IOMMU so that transfers between the PCI device and the VM can be properly mapped from the VM's address space to the host's physical address space. There's slight overhead on PCI transactions, but everything happening on the GPU is exactly the same, because the VM is running the same standard Windows drivers. The only real complication is that it removes the GPU from the host's control, so it's easiest to set up on systems with more than one GPU.