TBH it's surprising that it's only 'quite a bit far behind'.
Compare Intel vs M1 Macs with x86 vs ARM containers, and you will be blown away with the performance increase.
That is a strange way to put it. Rosetta 2 (and orig.) is not virtualization, it is emulation, though there is a half-decent argument that Rosetta 2 (and orig.) is not emulation either -- it is recompilation.
If you run an x64 Mac binary on the host, Rosetta (simplified) translates the code to arm64 then runs it. If you run a Linux VM and execute an x64 Linux binary or container inside it, Rosetta can’t help you. You’ll be running inside a big emulator - in fact, Docker Desktop uses QEMU under the hood I think.
But it's not as if you can't run a virtual machine native to the platform. Qemu works on M1, Parallels works on M1 (ARM VM only) and there is a preview for VMWare's Hypervisor that will run even Windows 11 on the M1, but the VM software is native code (but not necessarily the system in the VM), so Rosetta isn't used.