Some devs have found ways to slip through the cracks of the review process, getting emulators on the appstore for a few days or weeks before Microsoft took it down. Nonetheless, developers have found ways around this restriction.
Microsoft’s official Store Policies are very clear on emulators, it is not a gray area: Section 10.13.10 clearly states that “products that emulate a game system or game platform are not allowed on any device family”. Widely distributing it to all XBox users through the app store is another. Running an emulator in dev mode for your own tests is one thing. Notably though, emulators have pretty much “always” been disallowed on the XBox app store.