from the zipp site...

"To make sure that your power continues to be transmitted the most effectively, our bomb-proof shells ride on the finest ball bearings running in sets matched to 10 millionths of an inch separated by a molded Teflon ball retainer which is lighter and generates less friction and wear than traditional brass retainers, and we use very close fit non-contact shields instead of seals to ensure that the bearings remain free of contamination, but have ABSOLUTELY NO SEAL DRAG. To ensure perfect alignment of the bearings, any hint of flex is eliminated by our 15mm oversized solid 17-4 stainless steel axle. This material is just over 4 times stronger than the 1018 steel threaded rod traditionally used in track axles, and roughly twice the hardness to ensure that you will crush your dropout into powder before the axle thread gives way. Due to the use of these materials and the 15mm axle diameter, the axle is more than 10 times stiffer than a traditional axle assembly!"

basically, the bearings run free without touching anything other than the retainer. a normal bearing looks like this



Bearings reduce friction by providing smooth metal balls or rollers, and a smooth inner and outer metal surface for the balls to roll against. These balls or rollers "bear" the load, allowing the device to spin smoothly. in sealed bearings, the bearings are protected from dirt with the seals, but the bearings also touch the seals, which have more drag than metal.

The best designs for keeping dirt out include two seals: a contact seal closer to the bearing, and then either a labyrinth or a second contact seal further out. if anyone is a big enough nerd to subscribe to VBQ, the home made Herse BB was a perfect example of this.

Also, from the bike FAQ

Most so called sealed bearings are not water tight, mainly because
they have run dry, burning the seal lip which becomes a capillary to
suck water when wet. Phil Wood used bearings designed for used in
electric motors that use a rubber lip seal to prevent air (dust) flow
that always occurs in rotating machinery that sucks at the axle and
blows at the periphery. Such bearings were never meant to prevent
water intrusion, something they can do only for a short time when new.
This is the main reason why such "sealed" hubs were not available at
the time he introduced them