In-wheel electric motors put the motive power right where it's used -- at the wheel. With the in-wheel motor sitting in the rim, there's very little loss of energy between motor and wheel. Fully 90% of the in-wheel motor's electrical energy gets converted to mechanical energy.
In contrast, gasoline engines operate at about 20% efficiency. You can thank all those friction losses in the engine and drivetrain for this abysmal statistic.
So will the in-wheel electric motor replace the internal combustion engine? Who knows. It's one of many automotive power technologies in use or on the horizon. It's too early to tell which -- if any -- will dethrone the reigning champ.
While we wait to see whether the in-wheel electric motor will indeed propel our cars in the future, why not see this clever video from Siemens that explains how the motor works?