It runs from C64-mode, since it's also a C64-demo. The VDC-demo is the third part of the demo, right after the "terminal"-part. It first checks if you really have a C128 and then displays a scroller and logo on the VDC. I successfully tried this on my real machine, but neither VICE nor Z64K recognize the C128 correctly.
You can also load the VDC-demopart directly in C64 mode by using LOAD"2.*",8,1 and start with SYS16408. Effectively it copies the code from $4100 down to BASIC and just runs it. Somewhere in there must be the check that fails to recognize the C128 on emulators but works on a real machine.
Either way, the demo shows a scroller and a skipping logo, similar to VDC101, but more than 25 years earlier... Might be worth checking if it works in Z64K once the "check C128"-problem has been fixed.
A way to bypass the check in VICE and Z64K is to set a break point at 2100 in the machine monitor before running the VDC-demopart directly in c64 mode. The following commands work in both VICE and Z64K
bk 2100 x
When the breakpoint is triggered enter the following. note: You will need to press enter twice to exit assemble mode after the first of the following commands.
I read from somewhere that the c128 and c64 charroms might be different. Doesn't seem to be different on my real hardware where it matters for this demo though.
I found a simpler way to run the VDC part in emulators and hardware that fails the check. It is as follows.
At the fail screen press runstop+restore
On my hardware the bottom scrolling logo is jittery, even more so than Z64K. Otherwise seems very similar to how Z64K handles it. I would be interested in how it displays on other peoples systems and to know if you had to use the bypass to run it.
I seem to remember to have read somewhere that this was an error in the german character-ROM. The german C128 has another character-set with german umlauts and the original Commodore-character-set as well. The @-character however seems to have this error and since my C128 and both the demo-programmer are german it seems he used that way to test for a C128.