Actually it was not virtualized. It was just run on the EE. access to the IOP was limited due to aspects of the asynchronous communications. You can have full access to hardware, it just isn't easy. For example, the memory card access was limited to a specific folder on each card. (a little patch fixed this). Useful for installing the PS2independence exploit. As for normal access one could exit the linux environment into a new one that resembled the homebrew equivalent. (I never tried it but it is said to work).