I have one and yes, it does work. You have to use small chips not chunks and soak them for about an hour. It helps the chips smolder and give off smoke rather than just burn up.
When you burn wood and starve it for oxygen it will burn slowly and give off lots of smoke. You build a ripping hot fire of 1500-2000 deg F and there will be only a couple things from that fire. Heat, CO2, water vapor and some ash. Soaking the chips completely basically makes a barrier keeping the oxygen and wood from complete combustion.