I have been trying to think of a good way of visualising this...
The way you can think about it is this is like this:
You can imagine that AROS running on the PC is one computer, and AROS running in UAE is another computer. They run separatly.
Now imagine that these two computers are networked using a magic network cable, or you can even think of the UAE as an "Amiga-on-a-PCI-card".
The "UAE Computer" has full access to the devices on the AROS-PC and gets it's input/output directly from the AROS-PC, this is easy to do since they are both running the same operating system.
So when your normal 68k Amiga program opens a window on workbench, it calls the intuition.library from AROS running in UAE... but that intuition.library will itself call the intuition.library running on the AROS-PC... so the window will open on the AROS-PC's workbench.
A normal AROS program will do this:
Program--->Intuition.library--->Display on your PC monitor
An Amiga 68k program will do this:
68kProgram--->68kIntuition.library--->x86Intuition.library--->Display on your PC monitor
the 68k version of the intuition.library will need to be responsible for handling and byte order issues.
Since UAE emulates a full Amiga, you can run hardware hitting apps with out any problems (I remember most audio apps would hit Paula directly rather than use the audio.device), also you can run those gaems that take over the computer, like most A500 games did. These games can run in a window on the workbench or on their own intuition screen (depending upon user preference).
An obviously, if the UAE-Computer crashes, it can be rebooted without affecting the AROS-PC :-)