How is the image of the Page's XAML gets generated? Is it running a virtual machine and it's grabbing a snapshot? Does it send the XAML? Any details of that would be welcome.
How is the image of the Page's XAML gets generated?
Visual studio renders the XAML using platform's reference DLLs + compiled binaries of your app.
Is it running a virtual machine and it's grabbing a snapshot?
Nope, it all works in the same visual studio process.