AirDrop: Bluetooth or Wi-Fi?

How does AirDrop work? I thought it is just Bluetooth, but I am starting to doubt that now. Whenever I turn AirDrop on, my Wi-Fi and Bluetooth are automatically turned on. If I turn the Wi-Fi off, and try to AirDrop, *sometimes* it works, but sometimes it doesn't. It *never* works if I turn the Bluetooth off instead. So... Why does this happen? How does AirDrop work?