It uses emulation. While it is true the user needs to download a 'game image' rather than play the game directly from disc this is because that image is a virtual hard disk that contains the game and a customised Xbox 360 virtual machine that has tweaks for the game. It is similar to PC console emulators that have specific configs for certain games.
I thought they do a static recompilation too, from the original binary, but I can't look it up now.
That's actually probably the case. Xbox 360 banned making arbitrary pages executable (not even the Kernel could do it, the Hypervisor call to mark a page as executable had to come with the signatures signed by Microsoft's private key).
So they probably can get away with static recompilation.
http://support.xbox.com/en-US/games/game-setup/play-xbox-360...
> Xbox 360 games run within an emulator on Xbox One, which means you'll be able to use most features from both systems while playing games, such as screenshots, broadcasting, and Game DVR.
AFAIK you're right, developers have to upload a separate build for Xbox One-compatible games
Which is why they're slowly trickling them out a few at a time (though there's some gems in there!).
from your quote, it's probably neither.
looks like api translation like wine does. ...which is rather easy if you wrote the original api.
EDIT: https://en.wikipedia.org/wiki/List_of_Xbox_360_games_compati... "Unlike the emulation of original Xbox games on the Xbox 360, the Xbox One does not require game modification, since it emulates an exact replica of its predecessor's environment – both hardware and software operating systems."
I stand corrected.