Cypress Component Test Runner, introduced with Cypress 7.0, integrates seamlessly with the Cypress Test Runner to provide a robust tool for component testing in Vue CLI projects, supporting both Vue 2 and Vue 3 with built-in TypeScript compatibility. The setup involves installing Cypress along with Webpack Dev Server and Vue adapters, configuring a plugins file to use the Webpack configuration, and specifying the location of test files via cypress.json. The test runner allows for real browser testing of components, offering a visual and interactive environment that mirrors user experiences, with hot reload functionality for immediate feedback. This approach leverages existing tools like Webpack and Vue Test Utils, facilitating incremental migration and uniting testing with design, thereby enhancing the testing process beyond traditional jsdom-based environments like Jest.