Yes, my read on this is that IQbuds accept the external sound...

Yes, my read on this is that IQbuds accept the external sound (call that analogue) via mic, and process that into a digital output into your ear. All sound you will hear is the digital output. The IQbuds also accept digital via Bluetooth from your compatible iOS or android smart device and output that to your ear as digital.

The clever bit is two fold, firstly the ability to vary the external sound you hear to a level you request (noise cancellation), and secondly the SIMULTANEOUS ability of SINC to pick out the voice speaking to you and amplify that. In other words the IQbuds have the UNIQUE ABILITY to discect the spoken voice away from the noisy background.

Spectacles for your ears, they enable you to hear what you want to hear more clearly, or SUPERSONIC HEARING , as the CES2017 tech reviewer put it.