The ISS orbits in the outer fringes of Earth's atmosphere (at the upper end of the thermosphere, but below the exosphere), where gas molecules are still gravitationally bound to the planet. It's also protected by the Earth's magnetosphere from much of the hard radiation that would strike a vessel in true interplanetary space.
The pressure up there is very low by human standards, but it's not a vacuum. Atmospheric drag forces are still sufficient to drop the station's altitude by a kilometer or so per month.