I'm quite surprised by this descriptive term also; in fact I've always (for years) called this type an "application container" since it only contains the files

I'm quite surprised by this descriptive term also; in fact I've always (for years) called this type an "application container" since it only contains the files required by the primary process and doesn't have a standard init system (usually it is expected to handle PID 1 responsibilities in its primary executable or use a stub init (as when using e.g: systemd-nspawn --as-pid2 ... ). In contrast a "system container" has a regular init system and likely also package management (although that is optional) but was created using a package manager so the miscellaneous package-installed files are usually in there.