There are some things that don't make sense when an extension is running on a remote machine/container/etc. For example in Flutter when a user tries to run an application, if there is no connected device we will show them a list of local emulators that they can start (or given them an option to create a new one):

It doesn't make sense for us to do this for a remote session because if we created/launched an emulator, the user wouldn't be able to see it.

Similarly, it doesn't make sense for us to offer to launch other interactive tools like this:

As far as I can tell, there's no current API to tell if your extension is running on the "local machine" where it's safe to spawn processes for the user to interactive with, but I think there's a good need for one.