It turns out this part of the OS is open source. (Link is for macOS 10.12.6, but other versions are available.)
Reading the code reveals that the IODisplayWrangler is a class that interfaces with the power management system in order to manage display brightness. It detects user activity and uses this to determine when to dim, turn on, or turn off displays. When the display is on, the class sets a kernel assertion that prevents idle sleep. So seeing IODisplayWrangler as an idle sleep preventer is normal when the display is on.
In the developers' own words:
This is the Power Management policy-maker for the displays. It senses when
the display is idle and lowers power accordingly. It raises power back up
when the display becomes un-idle.
It senses idleness with a combination of an idle timer and the "activityTickle"
method call. "activityTickle" is called by objects which sense keyboard activity,
mouse activity, or other button activity (display contrast, display brightness,
PCMCIA eject). The method sets a "displayInUse" flag. When the timer expires,
this flag is checked. If it is on, the display is judged "in use". The flag is
cleared and the timer is restarted.
If the flag is off when the timer expires, then there has been no user activity
since the last timer expiration, and the display is judged idle and its power is
This driver calls the drivers for each display and has them move their display
between various power states. When the display is idle, its power is dropped
state by state until it is in the lowest state. When it becomes un-idle it is
powered back up to the state where it was last being used.
We register with Power Management only so that we can be informed of changes in
the Power Management aggressiveness factor. We don't really have a device with
power states so we implement the absolute minimum. The display drivers themselves
are part of the Power Management hierarchy under their respective frame buffers.