An IWAD - short for Internal WAD - is the main resource file for a Doom-engine game, containing all the game's original sounds, levels, and graphics.
3DGE needs an IWAD file in order to play; without one the 3DGE engine has no game data to use.
Alternatively, you can set your own IWAD with the -IWAD switch.
3DGE does not yet support the HEXEN IWAD, though it can read some graphics and level data from the game. It also does not support STRIFE.