Poe and the shotgun

It's not mentioned in the series, but i imagine something like the Holodeck in Star Trek:

"The holodeck is depicted as an enclosed room in which objects and people are simulated by a combination of matter, beams and fields onto which holographic images are projected, which appear solid to the touch. This matter is known as "holomatter", and usually disintegrates when the virtual-reality program is ended."

Source: https://en.wikipedia.org/wiki/Holodeck

*spoilers ahead*

[spoiler]
He is physical, but it is never really explained what he actually consists of.
He may seem like a 'regular hologram', since he is 'beemed' to and from various locations in the hotel.
However
In episode 9, he is killed by the bad-guys and you can see he disintegrate into powder, during that process, you can also see his inner parts.
[/spoiler]

The AI in the book (named Hendrix) was done differently. It wasn't an integral character. The show writers wanted a bigger character, I think. I don't know how he was able to interact with physical objects though. nothing else in that world seemed to be like him, so I think he was overplayed. I really enjoyed his character, though.