Second Life has a piss-poor reputation for helping content creators retain control over their creations. Skins (texture over avatar models), clothes, etc. are routinely ripped off because, amongst other reasons, they're cached as individual TGA files on the client computer, and 3rd party SL clients are allowed. These 3rd party clients (e.g. CopyBot) can and have been coded to save any texture desired to a place where the user can then upload to SL and use as their own (complex models are made from what are called sculpted primitives, or "sculpties", which are stored and uploaded as UV map images in TGA format)

Also, Linden Lab (the creators of SL) offer little to no recourse for stolen property, and have very arbitrary and frequently ass-backwards policies. For example, you can make a claim (true or not) that a user is underage and have them banned for 1 or more days almost instantly; to challenge the claim you have to contact Linden Lab (I think by phone, or snail mail) by which time you have been unbanned.

However, when dealing with content theft, you have to file a DMCA request and - this is the best part - FAX OR MAIL IT to Linden Lab, and they may or may not put it on the back burner. You can wait days or weeks while they get to your complaint.

An analogy is a country in which there is almost constant theft and assault, you are allowed almost no tools to protect yourself or your property, and a small number of magistrates wield arbitrary control over property, life and death (i.e. temp and permanent banning) with no real laws.

That SL isn't failing as fast as it should be is probably due only to a fairly large user base's average noobishness and inertia. /rant

It's pretty easy to figure out what they probably did: a port of XNU sitting under the most/all the higher level frameworks, and little of the BSD layer except the APIs. And like Joswiak said, thy can cut out a LOT of stuff without crippling the OS or APIs. A sizable chunk of /System and /System/Library can be cut out because it contains support for things not needed on a phone/ipod/internet device, then of course pretty much all of /Applications and that leaves you with a slim, but real, OS X.