It's NT's syscall translation layer, CPU mode switching backend and entry point front end. It was originally used to run 16-bit apps on 32-bit platforms but is now WOW64 so is to run 32-bit apps on 64-bit machines.
Basically it's a very light weight virtualisation layer.
And it works well. My circa 1996 RPN calculator I wrote in VC++ works perfectly on 2013 x64 machine.
Still, when I first heard the phrase "Windows on Windows" I had a chuckle.
It reminds me that I enjoyed the way x86 apps ran on my old Alpha NT machine. If I recall correctly, the process list included "fx32" beside each.
What are you trying to do? Make me feel bad for having a good laugh at the name when I first looked it up? :)
The Windows 2000 loading screen had the tagline "Built on Windows NT Technology." They left it there through multiple SP rollouts IIRC.
For everyone worried about Win98 relation simple "Built on Windows NT" would work.