Well, it is an air gapped system that depends on a possibly insecure input and output device. The decryption and signing is done exclusively on the device under the physical control of the user. No one has access to the secret key material, not even the user.

Every air gapped system has the weakness that you have to eventually get material on and off the system. That connection can be used to attack the air gapped system. The smartcard interface used here to isolate the systems might be considered weaker than other methods but it is intended to provide this sort of isolation.

> Well, it is an air gapped system that depends on a possibly insecure input and output device.

No, an air gap means that there is a gap of air between the system and any insecure network. By definition, a YubiKey plugged into a networked laptop is not airgapped because there is a direct electrical connexion to the laptop’s USB controller, which has either an electrical or an RF connexion to one or more networks.

> Every air gapped system has the weakness that you have to eventually get material on and off the system.

I really think that you misunderstand what an air-gapped system is. A desktop not connected to a network is an air-gapped system, and can be very useful. For years we computer enthusiasts used non-networked — air-gapped — computers and loved them. An air-gapped desktop publishing system would be very useful for producing samizdat in a repressive regime, for example. I imagine folks did exactly that in the late 80s in the Soviet Union. In my youth, all video game consoles were air-gapped, and they were very useful.

Right but, did you spot that in your answer you allowed for a situation where there isn't actually that gap of air at all, just because it felt intuitively reasonable to do so?

There is no "air gap" in your sense between say a Sega Megadrive and Google's servers, they're both wired to the electrical grid. But you (not unreasonably) disregard that. In contrast there is technically such a gap between my laptop and Google's servers, because it's running on a battery - however thanks to WiFi it certainly isn't "air-gapped" in the sense we usually mean.

Security Keys are indeed often electrically connected (via a USB port) but the design insulates this from the key management problem so in effect they are air-gapped. Any attack that crosses that gap might equally have worked by shining a laser at it through a window, or holding an electromagnet near it.