How does the emulator get connected to the internet? I want to know the secret behind how my emulator gets connected to the internet. No matter whether I connect my netbook to the internet through wireless, wired or mobile broadband connection, my emulator does not indicate what type is my connection to the internet. It shows bars just like in phones/tablets to indicate the signal strength (as though a sim has been inserted!) in the notification area on the top edge.

The emulator (gingerbread) is not connected to wi-fi. (I don't recall whether it does not have a wi-fi enabling option or just that I haven't enabled it) So there is no icon next to the time display near the right top corner showing that I'm connected to wi-fi! Yet it gets wi-fi internet on the emulator when I online via wi-fi!

I find this curious. So I want to know what's behind the scenes. For instance is there some communication between the hardware network driver and the emulator network driver by any chance?
The emulator is a program on your computer like any other. The program can connect to the Internet in just the same way Firefox can. In particular, this means it makes no difference what kind of connection the host is using.

From inside the emulator, there's a 'fake' network driver. It appears to Android like a mobile Internet connection, but instead of communicating with a cellular modem, it's actually using the usual network API of your host OS to send and receive data, just like Firefox. It also does emulator-specific things like simulating packet loss.