It emulates the game. Basically you install the game on the PS3, then grab the game's files from under /dev_hdd0/game/GAMEID/ and then plop them in the /dev_hdd0/game/ folder for RPCS3. You'll also need to obtain the unique decryption file for most games, which is generated on a PS3, when you start the game. It can be found under the /dev_hdd0/home/youruserid/exdata/ while the game is running.
You'll also want the firmware files for RPCS3, which you can find under /dev_flash/sys/external/.