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It seems like the benefits are having the device lock/wipe itself after a set amount of attempts in case of a brute force attack and not having to run software to decrypt the drive on the device you plug it into.
I included a picture of the IronKey Keypad 200 but that's just because it's the first result that came up when I was looking for an example. There seem to be a few other manufacturers and models out there and they probably have different features.
I am curious what do you think of them? Do you think they are useful? Do you find it more a novelty?
It was an ExplainingComputers video titled Very Useful Small Computing Things that made me think of them.
They occupy a strange niche full of contradictions.
Entering the code on the device itself should increase security as opposed to entering it on a compromised computer.
But plugging it into a compromised computer means the data is compromised anyway.
Their security is way harder to audit than a software solution like PGP. The actual "encryption" varies from actual decent setups to "entering the code connects the data pins with no actual encryption on the storage chip"
Not having to instal/use software to use them means they are suitable for non-technical users which in turn means more support calls for "I forgot the pin, it wiped itself, can you restore my data"
They are kind of useful to check the "data is transported on encrypted media" box for compliance reasons without having to manage something bigger.