"Managed VMs" is a service offering within Google App Engine that lets you use any runtime (e.g., Python, Node.js, Go, C) but get the benefits of the GAE PaaS auto-scaling, versioning, etc.

It actually works by shipping a docker container to the Google Container Registry (privately scoped to your project), spinning up a "VM" that shows up in your Compute Engine instances list that you can then SSH into if you want (this is why you're both right; they call it Managed VMs, it shows up in your GCE instance list, but they literally are, I think, running your docker container, probably with Kubernetes under the hood).

We're both correct.