In short: ip classless causes packets to be routed to the best-matching supernet route. Without ip classless, packets for which the destination network is not in the routing table will be dropped.
Example: 10.2.0.0/16 is in the routing table, a packet destined for 10.3.x.x will be discarded if ip classless is not activated. With ip classless, the packet is routed to the route for 10.0.0.0 (if any) or to the default route.
There also is a fairly explicit description of what this command does in the configuration guide for your IOS release.
Unless ip routing has been turned off there is always a routing table its just a question of how much the router knows. If you dont run a routing protocol or use static routes then all it knows is its attached networks and it can route between them if the hosts on those networks point to the routers address as their gateway.
On the classless issue the previous answer is what I have seen in books. In experience the effect of no ip classless is that the router looks at all addresses classfully and will not be able to route between two subnets of the same classfull network. If you put 10.1.1.0/24 on one interface and 10.2.2.0/24 on another the router wont route between them unless you say ip classess. In spite of what the interface masks say the routing process thinks they are the same network.
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