To run a subshell in a text terminal emulator, use M-x term. This creates (or reuses) a buffer named *terminal*, and runs a subshell with input coming from your keyboard, and output going to that buffer.
The terminal emulator uses Term mode, which has two input modes. In line mode, Term basically acts like Shell mode (see Shell Mode). In char mode, each character is sent directly to the subshell, as terminal input; the sole exception is the terminal escape character, which by default is C-c (see Term Mode). Any echoing of your input is the responsibility of the subshell; any terminal output from the subshell goes into the buffer, advancing point.
Some programs (such as Emacs itself) need to control the appearance
of the terminal screen in detail. They do this by emitting special
control codes. Term mode recognizes and handles ANSI-standard
VT100-style escape sequences, which are accepted by most modern
terminals, including xterm. (Hence, you can actually run
Emacs inside an Emacs Term window.)
The term face specifies the default appearance of text
in the terminal emulator (the default is the same appearance as the
default face). When terminal control codes are used to change
the appearance of text, these are represented in the terminal emulator
by the faces term-color-black, term-color-red,
term-color-green, term-color-yellow
term-color-blue, term-color-magenta,
term-color-cyan, term-color-white,
term-color-underline, and term-color-bold.
See Text Faces.
You can also use Term mode to communicate with a device connected to a serial port. See Serial Terminal.
The file name used to load the subshell is determined the same way as for Shell mode. To make multiple terminal emulators, rename the buffer *terminal* to something different using M-x rename-uniquely, just as with Shell mode.
Unlike Shell mode, Term mode does not track the current directory by
examining your input. But some shells can tell Term what the current
directory is. This is done automatically by bash version 1.15
and later.