Actually arcade machine emulators emulate the entire hardware, not just the CPU. They also emulate the memory, the ROMS, the PIO chips, multiple CPUs (some games had 8 Z80s). The physical controls are also emulated. Buttons, joysticks, etc are simulated in software to make use of the PC game controllers which have a completely different interface than the original arcade controls. You can even use different types of controllers than the original game. The emulators let you use keyboards instead of wheels (if you want), joysticks instead of trackballs, mice instead of light guns, and you can mix up combinations pretty much any way you want (at least with MAME).
<b>56K, slow and steady does not win the race on internet!</b>