IPTG binds to the lac repressor and inhibits it. In cells that lack the lac repressor gene (lacI), you get expression from the t7promotor/lac operator in the absence of IPTG
In addition to the explanation provided by Annemarie Honegger, be aware that depending upon the strain you are using, it may produce some but not enough lac repressor protein. If the plasmid copy number is high there be insufficient repressor to adequately control all the plasmid-borne promoters. These are the conditions where you often see partial induction in the absence of IPTG but can induce higher expression when it is added.