How does the Android OS estimate remaining battery time?
In the API it is described that the battery percentage is calculated by dividing the current level with the maximum level.
This can be seen in the quote below.
This leads me to believe that BatteryManager.EXTRA_LEVEL is either measured in Milli amps Hour (mAh) or a value between 0-100. This is a simple approach and not the answer that I hoped to find but it is an answer never the less. Now I just need a official source that states the answer. :)

Determine the Current Battery Level
In some cases it's also useful to
determine the current battery level. You may choose to reduce the rate
of your background updates if the battery charge is below a certain
level.
You can find the current battery charge by extracting the current
battery level and scale from the battery status intent as shown here:
int level = batteryStatus.getIntExtra(BatteryManager.EXTRA_LEVEL, -1);
int scale = batteryStatus.getIntExtra(BatteryManager.EXTRA_SCALE, -1);
float batteryPct = level / (float)scale;