The main reason behind system containers was the inability to run Flannel in a Docker container as Flannel is required by Docker itself. CoreOS solved this chicken and egg problem by using another instance of Docker (called early-docker) that is used to setup only Etcd and Flannel.
Differently, Atomic system containers will be managed by runc and systemd.
The container images, even though being served through the Docker v2 registry, are slighty different than a regular Docker container in order to be used by Atomic. The installer expects that some files are present in the container rootfs under /exports, the OCI spec file for running the Runc container and the unit file for Systemd. Both these files are templates and some values are replaced by the installer.
The communication with the Docker registry is done through Skopeo, that is used internally by the atomic cli tool.
The demo shows the current status of the project, these features are not still part of any release and most likely there will be more changes before they will be released.
I wanted to give a try to asciinema, this is the result:
The images used in the demo are maintained here: https://github.com/giuseppe/atomic-oci-containers/
More details on the current design can be found here: https://github.com/projectatomic/atomic/issues/298.