Well, from what I can find on their website
http://www.razerzone.com/p-133-the-razer-megalodon-71-surround-sound-gaming-headset.aspx , it looks like all the audio processing is done by the headphones:
Onboard Audio Processing
Offload processing to the internal sound card and take the demand off your CPU
Also, the hardware requirements are:
PC with built-in USB port
Windows® XP / x64 / Vista/ Vista64
Which would also point to the audio processing being done by the headphones. It wouldn't be too surprising, as there are USB soundcards. My guess is that their "Razer Maelstrom™ Audio Engine" is equivalent to CMSS 3D or Dolby 3d Headphone, and that the headphones themselves work as a USB soundcard.
As for this....
I'm still not sold on discrete sound cards for general use these days. It's another driver that is usually unstable(Creative's) and the difference in quality is usually not something you would be able to detect on something like a pair of headphones or the kind of low-end stereo system used by most computers. Maybe on a lower end dual or single core machine where you're pushing the limits of what the processor is capable of, but I'm not even sure that onboard audio still uses CPU time.
I'm guessing that the same people who say they can tell the difference between onboard audio and the newest Creative X-fi are the same people who can tell the difference between regular cables and gold-plated monster cables.
I thought the same thing as you, until I actually bought a sound card. There is certainly a difference in sound quality and clarity, even on relatively cheapo speakers. It's hard to describe the difference, but mostly you hear things in your music that you didn't hear before, like faint drums in the background, or a trill, or background voices, or even Bonos lips smacking in one song (which was the most surprising!). If you're sceptical, as I was, go and buy a decent soundcard and hear for yourself.
People also get soundcards is for the superior virtual 3d sound. If you use headphones, and want to hear virtual 3d sound, you need something like CMSS 3d or Dolby headphone, which as far as I'm aware of you can only get via soundcards.