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The concept of a machine type represents the ABI or HW revision of the virtual hardware being used and presented to the guest. It is in general recommended to be upgraded on an upgrade of qemu/kvm, but so far there was no interface for that which was easy to use.
Such a change is picked up by a domain when it is (re-)started as the virtual HW can't be replaced at runtime.
Libvirt support various hipervisors and all have machine types. But a machine type in the sense that virt-machine-type cares about are only really present in a qemu/kvm based hipervisor.