Belkin Ultra-slim 7-PORT USB 2.0 Hub

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Why does it need a power supply?

Does it need to have a power supply, or could I just plug it into the back of the iMac?

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    It's a powered USB hub, this allows it to supply power directly to the devices plugged into it, rather than relying on drawing power from the controller in the Mac, some hubs will work in both modes.

    In principle a single USB port should only power a single high power device (HDD, iPhone etc) so a hub that allows you to connect up to 7 high power devices usually comes with a stand alone PSU in order to supply 7 times the power the controller it is connected to can supply.

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