Below is a diagram coming from the ISR Project Home Page.

Virtual machine technology is used to capture the user's computing environment at the time of suspend. This environment consists of the user's operating system, applications, data files, customizations and the current execution state. By leveraging virtual machines, this state is re-instantiated directly on the machine at the resume site. This is not a thin-client approach, all process execution and computation takes place on hardware near the user. Therefore, ISR is able to provide the low-latency interactivity that users have come to expect. (Credit for image and legend: Intel Corporation).