My understanding, though I've not played with it, is that Looking Glass is a way to have hardware GPU accelerated guests "render in a window on the host." Normally, GPU passthrough for gaming has involved "You pass an entire GPU through to the guest, and use a separate monitor connection from that GPU for the output." So it's a VM, but not in the "interacts with the rest of the system as a first class window" sort of way.

I believe Looking Glass is a collection of techniques to pass a framebuffer from the GPU accelerated guest "monitor" back to the host, so you can have full hardware GPU acceleration in a guest, and still treat it like a window. I've not messed with it, though. Hm. Though I've got enough hardware to, right now...