It's necessary because normally, when iTerm encounters a BEL character it plays an audio file through the default audio output device. It needs to be patched to instead interact with the device over HID instead.

It is not transmitting every displayed character over USB. The terminal emulator needs to send a command (e.g. not just a character, though the distinction is besides the point) to the device.

This isn't a real thing, right? I mean, there's nothing to interpret the command even if a terminal did somehow know how to send it.

Edit: Okay, I looked at the MCP2221A and it has GPIOs as well as just being a USB bridge.