AirDrop: Bluetooth or Wi-Fi?
AirDrop uses Bluetooth to create a peer-to-peer Wi-Fi network between the devices.

Each device creates a firewall around the connection and files are sent encrypted, which actually makes it safer than transferring via email. AirDrop will automatically detect nearby supported devices, and the devices only need to be close enough to establish a good Wi-Fi connection, making it possible to share files across several rooms.