Emulation is the use of something specifically designed to act exactly like something else, for example, using software that acts like the hardware of a Super Nintendo game console in order to play Super Mario World on your computer. For the community of SMWCentral, this is usually exactly what someone means when they use the term.
Main Article: Emulator65c816 itself, which has a 6502 emulation mode) but it is usually software because that way one general-purpose computer can emulate many different kinds of devices.
Popular SNES emulators include ZSNES and bsnes. Both emulate the SNES hardware (and can run a Super Mario World ROM) but do it in different ways. bsnes focuses on accuracy and emulates code at the cycle level. Because of this it can be slow, but it has less glitches and can be more useful to ROM hackers because it is more like a real SNES. ZSNES on the other hand focuses more on features and speed, emulating code at the opcode level. ZSNES is fast, but does not always act exactly like a SNES.
Emulation itself does come at the cost of performance, no matter how it is done (Though hardware emulation is the fastest). The speed of emulation will always be less than that of using the real thing, assuming both the emulating machine and the target machine have the same amount of processing power and overall complexity. Obviously, if the emulating machine is 100 times more powerful than the target machine, there won't be an issue here, but this wasn't the case when the concept of emulating a Super Nintendo console first came around. Fortunately, modern computers are more than capable than emulating the SNES at 100% speed, though it'll be years until we can emulate the Wii, PS3 and XBOX 360 with acceptable performance on a PC.
Emulation is definitely legal when the target system is patent-free. Fortunately, even when the SNES first came out it was not new technology, for example a 65c816 processor was used in the Apple IIGS, so if there were patents, they are probably expired by now. Even if it is patented, a legal battle could go either way.
However, emulation of consoles is often associated with the pirating of video games. Surely, the Entertainment Software Association would want to halt the development and distribution of console emulators if they could, as this would make game cartridge and CD dumps useless.