You'll still want native code for maximum performance. But a lot of Win32 programs don't need extreme horsepower, and even with emulation will run well enough. So while it won't replace UWP, it fills in the gaps where their existing tools, APIs, bridges, etc aren't yet reaching. With MS and Qualcomm both putting resources towards it (special instructions or other CPU tweaks, OS-level optimization) it's viable. With Intel abandoning their low-margin low-power Atom efforts, MS probably felt like they need to give it a shot.
Now, while this may work fairly well on a ~5-15W tablet/hybrid/laptop model, I'm not certain about phones and Continuum. They may very well be able to pull it off, but it would need the highest-end low-power chip they can get their hands on to allow for a Win32-capable Continuum experience. For now though they need to continue to make improvements to Continuum, which are already in the pipe, to give it a more desktop-esque operation when docked.