No, internet is not needed in flight.
If the internet happens to be available because your iPad has a cellular-data connection, or if your iPad is connected to an internet-providing device (e.g. your phone is in hotspot mode), then it will use the internet. But it's not needed.
If you have an ADS-B In unit, then iFly will connect to that via WiFi. But that isn't "internet" per se.