To pin-point your location, your iPhone talks
to cell towers, GPS satellites and Wi-Fi nodes.
But there´s a trade-off between speed and
accuracy, here´s how Apple´s handset knows
where you are.

GPS - accuracy : 10 meters
GPS satellites orbit Earth, constantly
broadcasting an identification signal,
their location in space, and the time in their
atomic clock. The iPhone uses assisted GPS
which means it can tap into an assistance
server and a reference network, helping to
get a more accurate GPS reading more
quickly.
Pros : by far the most accurate location
system available.
Cons : Although A-GPS is much faster than
conventional, it´s still rather slow.
And because it requires a view of the sky,
it doesn´t work indoors or in built up urban
areas. 

 

Cell towers - accuracy : varies (about 500
meters)
You might think that your iPhone
triangulates its location by using multiple
cell towers, but it actually needs only one.
After identifying the single nearby tower
that it´s pinging, the iPhone queries a
database at Google that list the location
of cell towers. That information is sent
back to your phone, telling the device
approximately where it is.
Pros : Very fast. Works anywhere you
have a cell signal, including inside.
Cons : Accurate enough to find
restaurants, but not for directions.

Wi-Fi - accuracy : 30 meters
The iPhone can also pinpoint its
location usign Wi-Fi. A company called
Skyhook cruises cities to map the
location of Wi-Fi nodes. The iPhone
sniffs them out, measures their signal
strenght, and reports it back to
Skyhook servers. Based on this
database, skyhook computes where
you must be to have that particular
pattern of signal strenghts.
Pros : Fast. Surprisingly accurate if
you´re in an area with high network
density.
Cons : Useful only in urban areas with
lots of Wi-Fi networks. 

 

 

Source : Wired Magazine Feb 09