Drag and drop handlers implement the IContextMenu interface. In fact, a drag and drop handler is simply a context menu handler affecting the menu that the shell displays when a user drags and drops a file object with mouse button 2. Because this menu is called the drag and drop menu, shell extensions that add items to this menu are called drag and drop handlers. Drag and drop handlers work the same way as context menu handlers.
Note that drag and drop handlers are registered under the key of folder types (typically the Directory key). To change the behavior of the dragged object (IDataObject), you need to implement a data handler.