My research and AI's responses seem inconsistent or unsatisfactory, so I prefer to ask these questions to Xbox players, thanks to anyone who takes the time to respond!

Are the games actually emulated or are they just downloaded digitally using the disc as a key?
Does the compatibility transform games significantly or is it a remaster-like optimization?
Is it possible to use this feature offline therefore not caring about any Microsoft server support cessation?
Are there significant differences in how backward-compatibility works on Xbox One versus Xbox Series X?
What are some other aspects of this backwards compatibility feature that are worth mentioning?

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[–] RightHandOfIkaros@lemmy.world 5 points 3 weeks ago* (last edited 3 weeks ago)

It is exactly the same game. Audio quality will be identical to the X360 release.

The picture may be a bit brighter, I haven't noticed the X360 being darker. But picture output is effected by the emulator in the same way that picture output on a N64 emulator will appear brighter than a real N64 plugged into the composite plugs on an LED TV.