Reconfigurable intelligent surface (RIS) technology has emerged as a promising enabler for next-generation wireless networks, offering a paradigm shift from passive environments to programmable radio wave propagation. Despite the potential of diagonal RIS (D-RIS), its limited wave manipulation capability restricts performance gains. In this paper, we investigate the burgeoning concept of beyond-diagonal RIS (BD-RIS), which incorporates non-diagonal elements in its scattering matrix to deliver more fine-grained control of electromagnetic wavefronts. We begin by discussing the limitations of traditional D-RIS and introduce key BD-RIS architectures with different operating modes. We then highlight the features that make BD-RIS particularly advantageous for 6G IoT applications, including advanced beamforming, enhanced interference mitigation, and flexible coverage. A case study on BD-RIS-assisted vehicle-to-vehicle (V2V) communication in an underlay cellular network demonstrates considerable improvements in spectral efficiency when compared to D-RIS and conventional systems. Lastly, we present current challenges such as hardware design complexity, channel estimation, and non-ideal hardware effects, and propose future research directions involving AI-driven optimization, joint communication and sensing, and physical layer security. Our findings illustrate the transformative potential of BD-RIS in shaping high-performance, scalable, and reliable 6G IoT networks.