Indeed, this is completely awesome. I first thought it was some remotely hosted virtual machine, but it really runs inside the browser. Insane! Especially considered how fast it is.
When he adds X, we can run Firefox inside Linux inside Firefox inside Linux :')
Edit: seems the terminal emulator supports ANSI escape codes such as the 16 Linux colors, but not the XTerm 256 color mode (\e[38;5;CCm) or Konsole 24 bit (\e[38;2;RR;GG;BBm). Guess it could be easily added as it's HTML.