Transmeta was one of the first to do this. This is already true of (almost?) every modern CPU, they execute micro code. By transforming the CISC instructions into equivalent RISC instructions on the fly, the underlying processor is RISC. Transmeta designed cores that weren't strictly x86 for example, but the technology is more like RISC vs. (a little hand-wavey but correct enough for the sake of discussion) This is the foundation of Hypervisors, which are low level systems designed specifically for giving a managed interface for the host OS, but importantly these are still virtualized VMs meaning the computer architecture is still the same as the hardware.

Intel and AMD added additional instructions that reduced the chance that information running on one VM couldn't be leaked to another VM. Breaking out of this virtualized environment could potentially pose a security risk, and it is possible to detect that you are in a virtualized host because timing wasn't as exact as for these intercepted calls as they are on actual hardware. Instead they use a trap to prevent some instructions from executing, but the rest are passed through as native instructions.

Most VMs aren't full architecture emulation.

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