They could either go the syscall emulation route (as in current WSL), or possibly the "thin hypervisor" route, the fact they're talking kernel versions makes me think that may be what they're planning...
(I work at Microsoft but have no inside knowledge on this; just speculating.)
Whilst it doesn't explicitly mention Virtual Machines or Hypervisors, I'd read this as making use of that kind of technology with some additional tech. for interop with Windows to the level of WSL currently.
EDIT: and here's the confirmation https://devblogs.microsoft.com/commandline/announcing-wsl-2/ it's a VM
I've been running WSL for over a year with Docker for Windows and while the experience feels native to WSL (WSL has no problem running the Docker CLI and connecting to Docker for Windows) it'll be a very nice perk to just apt install Docker in WSL and not deal with DfW.