Emulate a Bluetooth Device from PC
(At least in Windows 10) Microsoft Store has an application called "Bluetooth LE Explorer" which is able to simulate different kind of Bluetooth GATT profiles as a peripheral.
Of course this is possible. Bluetooth is just a protocol and you can impliment it in your custom software to emulate all kinds of devices. If you need to emulate simple devices like keyboard or mouse, there are many ready solutions like this.
But if you have non standard device, there won't be any ready solutions and you will have to implement it yourself. What can help you:
If you have some kind of controller for PC and you want to emulate device with unknown protocol, you can use WireShark or other sniffer to understand what's going on.
There is an emulator called BT-Sim, but it is so poorly documented that I can't even guess what it does.
You can can take as example different android software like described in answers to this question.
You can check different program samples for PC like this.
For hardware you need only simple Bluetooth dongle. However, if you want to spy on some BLE (Bluetooth Low Energy) devices, you can buy hardware sniffer like this.