Yes, it has a database, but it sync's to the metadata in the file.
The part I like best is the "tags, with hierarchy". Maybe that's just a sign I have too many tags. You can't really get that feature without paying money, (photoshop elements, lightroom, IMatch) and this tool seems the best of them to me. (not as slow as elements, better features than the other two, not too expensive)
A few people above have mentioned the "thou shalt not touch the originals" principle, which I personally don't quite believe in, but it is possible with IdImager: You can set up the downloader to mirror to another location for backup or whatever.
IdImager has a bunch of other advanced features I haven't fully taken advantage of yet, like Stacks, Versioning, and scripting. It has a face detector, but it isn't as good as picasa's. Still, it's something, and picasa's tag system is horrible.
Overall, the best image organizer available right now. Technically I guess it is a general-purpose DAM, since it can import other file types, but it definitely focuses on images.