They're isolated by website but the tabs are not isolated from each other, like in Safari (in private browsing).
This distinction matters, if you primarily use private browsing, and have lots of tabs open from a site (say, Wikipedia, or Reddit, or pick a social networking service you don't want to track you by cookie[1]) - that particular website will know all the different tabs are from the same user potentially over a long stretch of time if at least one of those tabs remains open.
[1] Ad networks also track by IP address, so you need to take measures there too.
On the other hand it does have container tabs which reduce the need for private browsing mode a lot and is great for long standing isolated sessions <3
My goodness the container UX is tragic. I thought it was just an initial release, they would make it better It's been more than year. I can't even recommend it to non-tech friends because I have trouble using it myself.
google relations with Firefox always prevented this.
they explained to users that having 4 containers was good enough and screwed up every step of the ui implementation.