Project HXEN is a type 2 virtual machine manager that runs as a kernel module in an operating system, allowing it to leverage existing device drivers and provide a more seamless "application view" experience compared to traditional type 1 hypervisors. It uses a kernel module called HXEN.sys that manages virtual machines running applications while still providing security and isolation comparable to a type 1 hypervisor by using the Xen hypervisor underneath.