The element inside a headphone that converts an electrical signal into sound is known as a driver unit. You could picture it as a tiny loud speaker in your headphone.
A driver unit is made of a magnet, voice coils and a diaphragm. One would wonder how to measure a driver: by its radius, circumference or diameter? The diameter is the stated spec which is usually measured in millimeters. A driver unit's size is useful to gauge the capabilities of producing sound.
It may seem that the bigger the driver unit is, the louder the sound it's capable of producing. That's not true though, because for every headphone design, be it micro sized earphones or huge headphones, while the size of the driver unit varies, the loudest volume at which you would hear them, stays the same.
Why is it that the volume of headphones is not infinitely louder than that of earphones? The answer is, headphones are at a further distance away from your ear drums compared to that of earphones which practically hug your ear drums.
Bigger the driver unit, larger the speaker, and more powerful is the output. This doesn't necessarily mean better output. The quality of the driver unit is what makes a huge difference to the sound. The size of the driver unit for earphones falls in the range of 8mm to 15mm and 20mm to 50mm for headphones.
Earbud style earphones have bigger driver units as compared to canalphones because of their ability to house bigger units. Same is the case with headphones, an over-ear headphone will have bigger drivers as compared to on-ears. Learn more about headphone designs here.
The most common driver type used is the dynamic kind which use larger diaphragms. It is the most preferred as they do a better job at producing powerful bass and achieve the right amount of sound pressure without using a lot of power. However the concept of bigger driver unit - better bass doesn't apply to dynamic drivers.
These are very well suited for In Ear Monitors because they are quite small in size. But why would you want to have a small driver that displaces more air? Simply because you can have more of them! Most IEMs have anywhere between 1-4 balanced armature drivers per earpiece & Custom IEM's can have up to 20.
You will find planar magnets in high-end headphones. With this technology a diaphragm is sandwiched between magnets. A wire is made to go through the diaphragm in a serpentine pattern creating an electromagnetic field that can interact with the magnetic field creating sound waves. Audeze headphones are a remarkable example.
Most headphones use a moving-coil or dynamic driver. Electrostatic drivers are extremely expensive & uncommon. These headphones use a thin electrically charged diaphragm that are placed between two conductive plates or electrodes. A special amplifier is required to amplify the sound.
Hybrid Drivers are a relatively new technology which is a combination of dynamic and balanced armature drivers. This means audiophiles can enjoy a balance of both deep dynamic bass and bright treble. These earphones are easy on the eyes, but not so much on the pocket!