The system output usually contains a symlink from /etc to the static
configuration for the benefit of the stage-1 script in the initrd. The stage-2
script is usually started in the real root without such a symlink. In a
container, there is no stage-1 and the system output is used directly as a real
root. If the symlink is present, setup-etc.pl will create a symlink cycle and
the system cannot boot. There is no reason for the /etc link to exist in a
container because setup-etc.pl will create the necessary files. The container
module will now remove the /etc symlink and create an empty directory. The empty
/etc is for container managers to populate it with site-specific settings; for
example, to set the hostname. This is required to boot NixOS in an LXC container
on another host.

See also: #9735

docker-container: Remove /etc symlink