By means of a trip down virtualization history, I found a real gem in 1969 paper called A program simulator by partial interpretation, by Kazuhiro Fuchi, Hozumi Tanaka, Yuriko Manago, Toshitsugu Yuba of the Japanese Government Electrotechnical Laboratory. It was published at the second symposium on Operating systems principles (SOSP) in 1969. It describes a system where regular target instructions are directly interpreted, and any privileged instructions are trapped and simulated. Very similar to how VmWare does it for x86, or any other modern virtualization solution.
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