Crossbow is a network virtualization and resource control architecture that aims to address problems with interrupt-driven packet delivery and lack of policy enforcement in traditional networking stacks. It classifies packets as low as possible and assigns unique resources like rings, interrupts, and threads per service, protocol, or virtual machine. This allows for policies to be enforced based on traffic type. The demo shows creating a virtual network interface for a virtual machine, adding a flow policy to limit SSH traffic to 50Mbps on that interface.