To be more clear, let’s create a script named showarg:

#!/usr/bin/env bash
printf "%d args:" $#
printf " <%s>" "$@"
echo

Now let’s see the differences:

$ var="This is an example"
$ showarg $var
4 args: <This> <is> <an> <example>

$var is split into 4 args. IFS is white space characters and thus word splitting occurred in spaces

$ var="This/is/an/example"
$ showarg $var
1 args: <This/is/an/example>

In above word splitting didn’t occur because the IFS characters weren’t found.

Now let’s set IFS=/

$ IFS=/
$ var="This/is/an/example"
$ showarg $var
4 args: <This> <is> <an> <example>

The $var is splitting into 4 arguments not a single argument.