In AutomationView the simulation is also called emulation - the buttons and command titles say "Simulation", while settings and internal IDs say "emulation". They are the same feature. It is a pure in-editor scan-cycle simulator, with no external PLC or runtime.
Using the toolbar (button):
Look at the top right corner of the Sequence Explorer view title bar and click Start Simulation (the Play icon), or press F5. While running, use the Step, Stop, and Reset buttons in the same view title bar.
Using the Command Palette: