My understanding is that it has to do with form drag – aka pressure drag – which results in vortices forming in the “separation region” directly behind an airfoil. Or in this case, a rider. Essentially, the swirling of air behind the rider is turbulent – which is why a hoodie might flop all over the place – and that causes energy to be lost.
This video on Nebula (and YT as well) describes pressure drag at about the 02m30s mark for a sphere. But this graphic from Skybrary also shows the problem:
By providing a smooth surface for air to “cling” to, where it would otherwise form vortices in the separation region, should reduce form drag, although it will cause additional induced drag (aka friction with the new surface). But induced drag scales with speed and at cycling speeds, that’s less a problem than it would be at airplane speeds.
A related drag-reducing device has been used for semi-truck trailers, and those have really been proven to reduce fuel consumption. Although the Wikipedia article does not describe in detail the aerodynamic principles at play.
Here’s one site that has info on skirts (under the trailer to reduce side flow) and tails at the back. There’s an image of a wind tunnel view that gives a good idea what it helps with. Those vortexes at the back of a flat trailer suck a lot of power.
So would this also reduce the benefits of “catching drift” behind another rider?
This is a good question and I don’t really know how this device would affect drafting and related manoeuvres. But if I had to guess, drafting behind a lead cyclist should still be beneficial, but the “zones” where it works might change.
So for example, the optimal distance lee-ward of a lead cyclist might become shorter or longer. Longer could mean more space to vie for that position directly behind the lead. But shorter might mean it’s impossible to draft without crashing into the lead.
Side-to-side drafting distances might also be affected, like how birds travel in a vee-shape. Maybe the vee would become wider? That might not be beneficial, though, if it’s so wide that it’s impossible to stay on the racecourse.
TL;DR: I have no idea, and aerodynamics are hard. That’s why I’m intrigued by the field.