How can a .NET 4.0 project reference an assembly that uses the v2.0.50727 runtime?

How can a .NET 4.0 project reference an assembly that uses the v2.0.50727
runtime?

I have a c# project I am converting from .net 3.5 to .net 4.0 in VS2010.
It has references to other 3rd party dll's that have a runtime version of
v2.0.50727.
How can this be? I kind of expected a warning or breakage when building or
running, but I haven't. If my compiled .net 4 project is running with the
.net v4.0.30319 runtime, is it running the referenced dll with the .net
2.0.50727 runtime? And therefore, I still need old versions of .net
installed?
Or is the referenced dll running in the v4.0.30319 runtime?