Its a concept that is catching up especially with web and catalog based companies. Its helps them save on inventory costs in 2 ways. One they don't have to pay for space, second it takes away the guessing part of the inventory.
These drop-ship-vendors are benefited by way of fixed orders from retailers and retailers are benefited by less operating costs. There are software's available to manage such drop-ship-vendors that are automated enough to send shipment tracking paths to retailers who in turn pass it on to consumers. This way retailers know for sure that these vendors have shipped items from their warehouse.