That is exactly what it does. This is also a setup that will work fine, but it is actually much closer to how a servo would operate and negates quite a bit of the cost difference due to the far more expensive drivers, with encoders and current sensing on the stepper wires.
The encoders will tell you when to increase power because you're about to miss a step, the expected movement is lagging compared to the amount of input current. The current sensing will help you to detect tool strike situations before damage is done to the motors due to overcurrent.
The encoders will tell you when to increase power because you're about to miss a step, the expected movement is lagging compared to the amount of input current. The current sensing will help you to detect tool strike situations before damage is done to the motors due to overcurrent.