wubi install doesn't require you to create partitions - that's a major distinction. The filesystem under a wubi install is contained in a single file.
Because of the emulated filesystem-in-a-file, there might be performance differences, and lack of some features such as Hibernate.
Nothing is emulated(except the filesystem, where a file is mounted on a loop device) under wubi. Ubuntu has full native access to all your hardware, in contrast to VM where the entire system is emulated.
What makes it so special?
What makes it so special is that you can install an OS just like any other Windows application, try it out, get to grips with it, experiment with it, and then if you don't want to use it anymore - just uninstall it.
In contrast, if you install via the "normal" way, there's the bootloader management, creating and managing additional partitions, different types of partitions and then trying to remove these can be quite daunting.