The guest OS is rendering its graphics directly into a frame buffer in memory that is read and displayed directly by the host graphics card. There is no compression or anything like that. Essentially, it is a memory to memory copy.
As such it does not suffer from side effects from lossy compression (color shift, artifacts) and the latency is only as long as it takes to do memory copies, which on modern cpus is handled almost entirely without needing the CPU proper.
This will permit windows guests on linux hosts to display GPU accelerated video and graphics on the host with basically no delay, which will be the best user experience. Your windows guest with a passed-through graphics card no longer needs its own dedicated monitor.