Briefly, someone steps up and says they'll run a group buy for "xyz" products. If it happens to be something like CSUSA kits, they generally publish a price list showing the discounted price for each kit and often accessories. People tell them what they want to buy and pay via paypal or other means. They person running the group buy then orders everything and when it arrives at his/her house, they have to sort it out, re-package it and mail to the people who ordered. Having done one relatively small group buy, I can tell you it is a lot of work and if you're not careful, you can very easily lose money on it instead of breaking even.
I believe the only place that gives a discount to IAP members is Klingspor. I think there's a post about it in one of the classified sections.