Forum users commenting on the ESX boot process at this VMTN Forum topic:

Very roughly, Linux starts up, gets to a certain point in the process where it loads a certain kernel module – that kernel module freezes the whole system, inserts ESX’s kernel as a hypervisor, then resumes Linux as the first guest OS. (The kernel module is NOT the hypervisor – it’s a mechanism to load a hypervisor). After that point, the Linux session (the Console OS, COS) continues to boot as a normal guest would, and is essentially a shell interface plus a convenient container for a few apps (like the host agent, which communicates with the rest of VI3).

and:

All of the above is a very complex way of saying that the Console Operating System, or COS, is a modified RedHat Linux distribution created specifically to interface with and manage the underlying, proprietary and unique, VMware kernel.
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It becomes confusing to neophytes because of the relationship with the COS. It is usually the first thing that most see and so they incorrectly assume that they have been misled or lied to.