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Operating system and processes run as processes on the host kernel
Hardware is emulated
- Disks - files in the host filesystem
- Terminals and serial lines - xterms, ptys, ttys, sockets, file descriptors
- Network devices - slip, ethertap, and TUN/TAP devices
Runs as normal user
Both the OS and its processes run as processes on the host kernel. Its hardware is virtual. A block device is emulated inside a file in the host filesystem. Consoles and serial lines are impemented by ptys in the host. There are also two network drivers, one implemented in terms of a slip device in the host, the other as an ethertap device, plus a couple more in the works which use other interfaces such as TUN/TAP.
The kernel normally runs with as a normal unprivileged user, so even though you may be logged in as root in the virtual machine, that gives you no extra permissions on the host.