Okay, are you guys using wrong terminology? Are you talking about a filesystem image as a "VM", because that would not be correct. A "Virtual HD" (VHD) is not a VM. Do you think a WSL2 distro instance is a "VM" because it's persistent? Did you know Docker containers can be persistent as well, people just choose as a best practice not to use it like that? Does that make them magical VMs?

WSL2 has a single VM running as the process vmmem (or vmmemWSL in the newest versions). This is the single Linux kernel that will be shared by every WSL2 instance. It will also be the instance that hosts Docker containers as well. I mean, I'm just echoing myself and apologies for the repetition, but this is just easily confirmed, utter factual truth.

A rootfs is not a VM. WSL2 and containers have different nuances about their filesystem and isolation (WSL2 instances is aware of other instances, for instance, as a design aspect, and WSL2 persists rootfs changes while docker as a best practices does not), but they're more alike than different. And they share little in common with something like VirtualBox or vmware, which actually isolate every such system as VMs.

Again, sigh, if you install 10 WSL2 "distros", you will have 10 rootfs overlays on your drive, and 10 persistence VHD files. When you run these the VM they all run under in the shared vmmem instance, which is the single utility Linux VM.