The processor could act as a virtual host and load your OS on it as a guest computer with its own operating system. Your OS would really have no way of knowing this. So they could literally know everything you are doing on your computer, including keystrokes, etc and it would be totally transparent to you.
This could work even when you are not online, and it could buffer data as needed to be sent when the PC goes online.
It makes me wonder about the name of the project XKeyFactor or whatever, it made me think that they might actually have insight all the way down to key logging.
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