It's been a while since I spoke to their techies during my product evals, but as I understand it the drivers are loading and then encrypting the USB channel between the OS and the actual IronKey. They then accept your password and pass it to the key's cryptochip, which holds the keys that were generated during initialization, and decrypts/encrypts the data as it's leaving/entering the key (on the fly).
The drivers also, of course, have to power the key generation process since you can always nuke a key and regenerate its keys.
Finally, they do make a "Personal" and "Enterprise" product in addition to the Basic. In those models you get features like a hardened, privacy-tightened Firefox (for Win*) and, most important to me, remote management of the keys for your enterprise. Those kind of advanced features do require drivers.