The repo doesn't contain the actual distro itself, it appears to be loading CheerPX's virtualisation engine and feeding it a disk image here https://github.com/leaningtech/webvm/blob/6efab7e60bf6f173a2...

Assuming they wrote their own xterm interface (no idea if they did, I got as far as that), seems everything open-source is fetched by the client at runtime. This feels to me more like a bootloader than an OS. Not sure where that lands it license-wise whether merely linking to the image requires appropriate licensing and attribution but either way the work seems pretty straightforward to replicate assuming you have / can supply an xterminal-esque interface and can compile your OS image appropriately.

I don't think they're doing anything wrong licensing-wise but I guess it depends on how the law defines including software as a library, whether that needs to happen at compile time or run time, or whatever. Seems like a grey area?