I noticed my error. To be fair, I don't think I read the diagram backwards. I think the diagram is drawn backwards instead. In it, iwd seems to talk to the iwd backend via D-Bus as they're close together.
Or maybe that's a diagram technique I'm just not used to.
It reads as a fairly normal diagram to me; NetworkManager has an iwd backend component/plugin that talks over D-Bus to iwd, which in turn stands on top of ell which in turn stands on the kernel (which itself contains a bunch of components of interest).
NetworkManager can use iwd as a wifi backend instead of wpa_supplicant, but nm isn't needed as iwd can also manage the networks on its own. iwd should never run at the same time (on a single network interface) as wpa_supplicant, as wpa_supplicant is (almost?) entirely superseeded by it.
That paragraph of the article looks to be ~6 years out of date according to the network manager version number it lists, around the time of the initial iwd release, and the whole article seems to be at least 2-3 years out of date since then iwd is well into version 2.x now.
Distros like Ubuntu have defaulted to iwd as the NM backend for Wi-Fi for a couple years (and now in the LTS version). It really is a quite popular and stable replacement to wpa_supplicant.
