The process of dropshipping is pretty simple yet very ingenious (in my view).
It basically involves three parties who take an item (a product, a lot) from manufacturing to market (end users).
Let's utilize a portable GPS Navigator as an example item to demonstrate the eBay dropship process:

• The GPS navigator manufacturer is a company that produces the portable GPS navigators.
  This GPS manufacturer doesn't sell directly to the consumers or supply the retailers basically all for to the end users.
  They usually use distributors to handle that task of moving there GPS navigators to the end market.
  the manufacturer sells GPS Systems by the large quantities to these distributors and takes 40 dollars per GPS system.
   
•  The GPS navigator distributor (aka dropshipper) is the company that orders gps systems in bulk from the gps manufacturer and moves them to resellers and different retailers at a cost of $45 each.
  The dropshipper does not freight GPS navigators to the retailer, but fulfills orders on the retailer's will as the retailer sells the items to consumers via eBay  
• The GPS navigator retailer (you): this is the company or individual that offers and sells GPS systems.
  In this example obviously you are the GPSnavigator retailer.
  The retailer (seller) purchases the gps navigators from the distributor as they are sold to the public - usually one or two at a time - and has the distributor ship the items directly to the consumers.
  

Sometimes manufacturer and distributor are the same company.
The obvious advantage of this process for you as a retailer is this: you don't have to store the item and you don't have to pay for shipping (more often than not dropshipping fee that distributor is charging per item is much less than you would pay for packaging and shipping it yourself - not taking the labor into consideration).
This business model makes a lot of sense for those who will to spend more time and effort than money (i.
e.
they don't have much initial capital to "burn" through their online endeavors).
So if you are in that position at the time - eBay dropship business is exactly for you in my view.