It would be unreasonable to the point of impossibility to expect it to implement every instruction that an x86_64 CPU could possibly have. So as far as it pretends to be an x86_64 CPU, rather than every x86_64 CPU, it works on all [program] binaries.
I'm thinking it's more of the AVX instructions still being covered by patents. Some older comments [1] suggest that plain AVX will only lose its patent protection in 2031.
Another factor is that Mac software was never able to rely on the availablility of AVX instructions anyway. macOS Catalina was officially supported on some systems with processors as old as Ivy Bridge, which lacked AVX support.
I thought it was up to the software (for example, a video encoder like Handbrake) to detect whether a processor supported a set of instructions, and then try to use them?
That's how it's supposed to work, yes. And any software that does that should probably work fine on Apple Silicon, by falling back to the non-AVX path under emulation.
I've seen some poorly behaved Mac software which used AVX instructions without testing for availability. It crashes if run on some older Macs, and it won't work at all on Apple Silicon.
It would be unreasonable to the point of impossibility to expect it to implement every instruction that an x86_64 CPU could possibly have. So as far as it pretends to be an x86_64 CPU, rather than every x86_64 CPU, it works on all [program] binaries.