I am trying to understand how software like App-V and sandboxie (http://www.sandboxie.com/) work. But for the life of me, I can't think of anything that could make this possible. How do they intercept API calls and trick the target software? If someone would say that it's just magic and pixie dust, I would believe them. Seriously though, are there any white papers that discuss solutions to this problem?
If this is possible on the CLR level then that would be good but I'm willing to go native if I have to.