An emulator does exactly as it says: it emulates. It creates an environment that appears to a running program to be identical to the real thing. This is done by emulating the hardware (e.g. BSNES), emulating the runtime environment for a native binary (e.g. VMware), or most commonly, a mixture of both.

A simulator -- at least in the world of Apple iOS development -- does not attempt to emulate iOS hardware, or even the iOS operating system. All the simulator does is provide a virtual display and launches an instance of Launchpad.app. Your app then runs within that virtual display, and talks with natively compiled copies of the iOS APIs, but otherwise it's a normal Mac OS X process that can be viewed and poked with Activity Monitor, or top, or whatever.

The simulator doesn't need to "boot up". There are no virtual drivers. There's no memory management. There's no emulated silicon whatsoever.

The only downside to this approach I can see is that the simulator can't be used to test some things like resource limits, and some things behave very differently, like OpenGL. But you have to test on real hardware anyway, and Apple have made native testing just as easy as simulated.