Wow, that blog post title sounds like every formulaic business book title from the last twenty years. I should probably change it. I'll worry about that later. For a change of pace, I am not going to write much on this subject because this is one subject that needs to be explained visually. So for the most part this blog post will be very little in the realm of text but hopefully a very ugly, yet hopefully very helpful picture.
In essence, AppV remains behinds the scenes. When the EXE is launched, the App-V virtualization manager receives a blocking callback function and triggers a series of verifications to determine if a process should be virtualized or not. This makes it very flexible especially considering you may be dealing with native EXE's, EXE within the App-V VFS, potential co-existence with the 4.6 client. Hope this flowcharts helps to explain the process!