I could be wrong but without the IFP and therefore the nitro or air the shock would effectively hydrolock because there needs to be some sort of expansion room. The pressure and volume of nitro or air that is in that part of the shock effects how the shock feels in terms of damping performance. If there is a higher pressure you get stronger compression damping etc.
The IFP is floating because there is nothing mecanical holding it in place apart from the O ring that forms the seal between the gas and the oil. The IFP moves forward and backward slightly when the shock is in action.
The reason most shocks/manufactures use nitrogen is because there is no moisture in it and it is relatively although not totally inert. Air is used in some shocks such as DHXs and I think some rock shox use it but Im not sure. The theory is that using nitro is more predictable because it is just one gas and with air there are a number of gasses and some moisture and that could adversely effect the shocks performance. IMO probably not enough for a normal person to notice tho.