How does impact wrench work?

Anyway, pneumatic and electic impacts work the same way, aside from the air vs. elec motor. I'm not very good at describing things, but here goes. There's a heavy cylinder in which the anvil shaft can rotate in. On the cylinder, there's a dog that can pivot back and forth. There is also a small rotaing collar that can push the dog one way or the other. The motor drives the collar, which pushes on the dog, which in turn pushes on two projections on the anvil shaft. This whole assembly spins around until the anvil shaft is stopped by you trying to turn a bolt. Then the fun starts. The anvil stops, and the increased force from the driven collar causes the dog to pivot away from the anvil. The cylinder+dog rotate one revolution until the dog hits the projection again. The whole cycle then starts all over again with the dog repeatedly hitting and releasing the shaft until the anvil starts to rotate. There's your impact.

This info was gained whilst overhauling a Chinese 1/2" impact wrench. Air tools are really fun if you like playing with machined aluminum and steel.

Link

As far as the screws are concerned, I do drive a healthily sized screw from time to time, but the main advantage of impact drivers is speed. Since you don't have to waste all your battery energy (yes, I'm talking about cordless tools here) on motor torque, there's more left for speed. A typical cordless drill/driver only drives screws at low speed, which is something like 500 RPM (no load speed), whereas an impact driver achieves over 2000 RPM (no load). And there's far less slipping of bits and stripping the head of your screws, which is a nice bonus.