The virtual console (VC) is a platform to play retro games on your Nintendo Wii. For more information about the VC visit the VC page of wikipedia.
A little warning, as of this point not much is known so most of the text here will be speculation.
Internal game names
The folders which the Virtual Console files (content.bin) are saved in have systematic four character names which tell us something about the game. The first character tells us what system the rom belongs to.
N : N64
J : SNES
F : NES
M : Genesis
P : TG16
I think that the second and third char is the game identifier. The last character is probably the regioncode.
Let's take F-Zero as an example. The folder for F-Zero (USA) is named JACE. The 'J' tells us it's a SNES game, followed by 'AC' which tells us this is probably the third game released for the SNES and the 'E' tells us it's a USA release.
Funny thing is that when you change the folder name to something else like FAKE (for The legend of Zelda) the Nintendo Wii doesn't reconize the game channel anymore. So it somehow checks the games content.bin with the foldername.
The virtual console games are encrypted, this to prevent people exchaning VC games. The way it looks right now is as follows:
Your Wii contacts the the content server, it checks your wii points. If you have enough wii points it downloads a small tmd file which probably has some metadata about the real rom file. After that the rest of the content gets downloaded. This other content usually means 6 or more seperated files. (see darkfaders  script). Roto writes that he thinks the tmd data and the rom data get together to make the real channel file (content.bin) but I have to disagree. Nothing suggests the tmd file does anything more then describing the acutal rom file. Maybe the tmd file is stored on the Wii for use when you transfer the channel to sd and encrypt it. This could mean that the rom files are actually unencrypted when they reside on the wii.
EcksBill, over at WiimodWii, came up with some solid evidence that the tmd file is indeed describing the acutal rom file. Look at the following images:
An other weird fact is that the size of files 0,1 and 5 vary per game while the other files stay the same size.
How the files are actually encrypted and if there is some sort of compression is unkown at this state.