I would just call this a shell or a runtime environment. It's not an OS and I don't think we should co-opt that term. We don't call nurses virtual surgeons or construction workers virtual architects.
I agree there is probably a better term, but the differentiation would be that you are abstracted one level up from a native shell, and thus could probably more easily write a cross-platform "virtual OS" that could run on top of Windows, OSX, etc - and install it with the ease of running an application, as opposed to fiddling with more sensitive things.
while impressive, this is a userspace program, quite different from an OS, even acounting for their virtual cpu.