It's a plugin developed by Garage Games that is basically an API to plug in any 3D engine to allow it to run inside a browser. They are using Torque it seems to showcase this ability. So it would be running native DirectX or OpenGL. Not some custom graphics api built for web (ala flash or shockwave). Hence, they've claimed there is 'no slow down' or more accurately: it's the equivalent of having a full on 3D directX game running full screen and a browser window open in the background (which doesn't hurt frames on my computer anyway).
My guess is it will function almost exactly like Steam does today, but instead of a custom desktop app that runs in the background you'd be using your browser.
My guess is it will function almost exactly like Steam does today, but instead of a custom desktop app that runs in the background you'd be using your browser.