The emulator uses dynamic recompilation of the N64 machine code to PowerPC machine code and full hardware accelerated graphics to achieve (mostly) full speed emulation. Currently the emulator is in beta stage and can run many N64 ROMs at full speed in most cases.
The Nintendo 64 console is very difficult to emulate (even PCs have problems with it). So maybe the emulator isn’t perfect yet, but at least it gets the job done.
Full details http://wiibrew.org/wiki/Wii64