The best way to understand snapshot backups, including Hyper-V, is that they take a backup of the entire virtual machine system, which includes the OS, files, folders, SCC and SS data. They are one step removed from the OS-level paradigms like Shadow Copy and System State, and rather are an attempt to capture the entirety of the system as it currently stands. This method is possible because the systems themselves sit on a hypervisor that can take snapshots of the entire system.
Inherently, this level of protection is (IMHO) more secure, and allows you to ensure that the system is backed up at its most basic level, by asking the hypervisor running the Virtual Machine to snapshot the virtual system and back that snapshot up.
A rather rough analogy is that it's equivalent of taking a physical server and making a copy of it, and placing that copy on tape/disk. VMs don't care about the hardware it sits on (roughly speaking), nor do they care what OS is running on them, they can be snapshotted and copied off to ensure the system is safely backed up.
