The man operating the Iron Man is Clarence Ward, the criminal industrialist humbled by Tony Stark in Irak months ago. Tony is able to defeat him right before Pepper Potts at Stark's War Room activates a failsafe which shuts the Iron Man armors down.
After Tony heads out, the U.S. Army Commander on the field shots Ward fatally. A week later, Tony goes to Japan to attend Rumiko's funeral, mourning the passing of his great love.
Back in the States, Tony resigns as U.S. Secretary of Defense. He makes the world believe that someone else is to wear the Iron Man armor from now on (but it's a trick, he will still do). And he's cheered by employees when he enters the Stark Enterprises office building returning to his industrialist life.
Epilogue: The Mandarin's son has Ward's weaponry, and prepares his attack on Stark.