One of the confusing bits about WinRT is, well, everything. But after conferring with others and studying Microsoft's documentation, I can make the following general statement: WinRT (the new Windows Run Time) is not a replacement for Silverlight or .NET, it's a replacement for Win32. And that means that it's the new native runtime for Windows, and not a managed code layer that sits higher on the stack. And that means further than the layers that do sit on top of WinRT--XAML/C# (and other languages), HTML/JavaScript, and DirectX--are far less abstracted from native code than was previously thought.
This has many ramifications. It means that all of these layers--XAML/C# (and other languages), HTML/JavaScript, and DirectX--will have basically identical capabilities. And it means that HTML and JavaScript applications will likely run just as fast, generally speaking, as do C# and XAML apps, something I suspect will be surprising to many people.
Microsoft has an unfortunately inaccurate high-level diagram showing the relation between WinRT and the environments its replacing (which are shown as IE, Win32, and .NET). But the important thing to note is that there's the NT kernel and then, right on top of it (like Win32) is WinRT. This WinRT has an application model and three boxes of capabilities that are expressed by APIs (Communications & Data, Graphics & Media, and Devices & Printing). "Above" WinRT is the two sets of presentation layer/programming language couples: XAML and various high level programming languages (C#, VB, and so on) and HTML/CSS and JavaScript, respectively. (DirectX is left out, but this sits on top of WinRT too.)
WinRT solves many of the problems of Win32, from an apps perspective, though it can't be used for certain things of course (writing NT services, drivers, and the like). Apps created for WinRT are safe, secure, and sandboxed, can't wreck other apps, can't cause "Windows rot," and all install in just 2-3 seconds. They feature isolated storage, single folder installs (as per the Mac), and require user consent to access the general file system. When Microsoft says it "reimagined" every aspect of Windows, this new runtime, or application model, must be included as well. This is part of it, a modern, truly different app platform that is far more different, and far more capable, than many people understand right now.
And in the same vein of blowing past peoples' expectations, virtually no app could not be written as a WinRT app. Many are imagining very simple, HTML-like apps, and while I'm sure there will be plenty of those, you need to reset your expectations up. WinRT is amazingly full-featured and not constrained to goofy utilities and simple games. The next "Call of Duty" could be a WinRT app, complete with support for Edge UIs and Charms.
And here's something interesting: Virtually all of the Microsoft WinRT apps--Mail, Calendar, People, Chat, and so on--are all written in HTML and JavaScript, not C# or another supposedly superior language.
And you laughed when they repeated "Windows reimagined over and over again in Tuesday's keynote. I'm starting to think they didn't push this point enough.