It looks like the preamp sections are digitally modeled, but the power amp section is not. Well, I guess you could say they are "analog models" of different power amps, since it's physical, analog switching going on. Essentially, this is intended to be the ideal power section for using a POD HD live.
I didn't think the sound in the videos was all that great. The cleans sounded very good, but the gains were messy and fuzzy. It's a great idea, but I would also worry about reliability. Line6 stuff is always fragile, and now to add a shitload of analog relay switches too? Sounds like a major malfunction waiting to happen at the worst time.