So... Win32 runs in virtual mode. In 2025, we don't think of that as a Virtual Machine, but it totally is. Hardware access is trapped by the CPU and processed by the OS/DPMI server.
It's not a virtual machine. There is no hardware machine that presents itself to function like a protected-mode ring 3 task on an 80286 or an 80386 functions. And the 286 and 386 both lacked a "virtual 286" and "virtual 386" mode (although it would have been almost-trivial for them to support it; Intel just decided not to, probably figuring it wasn't important).
Virtual 8086 mode, on the other hand, does behave exactly like a real 8086, which otherwise would have been very slow to implement on a real 386, and was either very slow on a 286 or impossible due to the 286 having some errata that prevented normal virtualisation techniques (the 286 had some non-restartable exceptions).
