There are different kinds of unschooling as far as I understand. There's the kind like is being explained by others here. No use of curriculum - they are more for EXPERIENCING it all and understanding with a REAL understanding of it. They follow their child's interest and don't force them to learn things, but they do provide a wide variety of learning opportunities so there is a lot of options for the kids to learn. It's a much more exciting/fun way to learn. So many kids in school get the attitude that learning is so super boring and not fun and they try to avoid it at all costs. This type of homeschooling is an awesome way, in my opinion! We're doing a mix. We do use books and things like that (Hooked on Phonics for reading, Explode the Code for reinforced reading and learning writing, etc), but a whole lot of what I try to teach my kids is by experience - real life experience. Instead of teaching my kids about butterflies and showing them pretty pictures at telling them random facts, we bought some caterpillars and watched go through all the phases to become butterflies. They were fascinated.
So, it's definitely not that they aren't being schooled, it's that they aren't being sat down, given worksheet after worksheet and forced to do things that are totally boring and uninterested to them. They are being taught things in a different manner. I do a mix because I'm not sure how I can teach them everything without using some books/worksheets and such. My kids love it, though. They think it's fun to have workbooks.
All that being said, there is another type of unschooling that I recently learned about. It is much more along the lines that you are referring to. The parents do absolutely nothing when it comes to the schooling of their children. They do not offer learning opportunities, some are apparently offended at the thought that they teach their child anything. They are 100% expecting their children to learn through life experiences completely on their own. There is no guidance or opportunities given by the adults. I was on a homeschooling group where they were talking about this. I hadn't realized there were different types of unschooling! I definitely do not support this type. The children will certainly still learn many things just by living life, but they won't be learning what they need to learn. It was bizarre to me to read what some of the parents were saying.
So, yes, there are some people out there like you are describing. But most of the are not like that. Most unschoolers are "unschooling" because they aren't doing a classroom setting type of environment. That is why it's "unschooled". They are living and teaching with life itself, as well as letting a child's interest lead the way. You'd be surprised at how many things kids are naturally interested in if you let them! Granted, it does mean that at times they will be behind in some areas, but it also means that they are way more advanced in others. In the end, it evens out. And, of course (at least with us), there will be a time where they will have to learn things that bore them...because they need to learn it. But, overall, I think it's a great idea.
And, I, too, am shocked that there are people out there who provide no learning environment, other than typical home life, for their child (and there really are people who do this!).
Oh, and I somehow missed this until I was rereading just now. I don't think it would affect their social and conflict resolution skills too much. Odds are they are getting social interaction somewhere. And dealing with conflict is common in a family. But if they are getting NO interaction with other people at all...yeah, that would end up causing social issues. Just almost all homeschoolers I know are actually quite social.
Anyway, hope that helps some!