I'm not arguing that VMs vs API compatibility layers aren't different, but that the specific testbed case you'd mentioned of emulations on a single host is nothing novel.
A compatabilty layer generally takes away the kernel's role. Is that the case here?
Generally packages are concerned about interactions in 'user land' and the package manager of the distro. By not carrying around multiple copies of the kernel and its internal data structures this compatibility layer provides a better solution (in terms of resource utilization) for working with several different distributions on a single system than the VM approach does.
A compatabilty layer generally takes away the kernel's role. Is that the case here?