Mac|Life has
a pretty neat breakdown of just how the iPhone's faux GPS work (or doesn't work, depending on the situation). Long story short, the Locations feature is pretty darn close-- unless you really do need GPS. On average, it seems like triangulation put the guessed location (represented by the blue pin in the pictures) off from the actual location (represented by the red pin) by about .5 miles.
Which is great if you just want to know where you are (which is what it was designed for, obviously). But not so great if you're actually trying to do something you'd need GPS for (like
geocaching). Two drawbacks here -- I've been trying the Locations feature around Chicago, and I've found that if I try it more than once, or am moving, the app picks up a little better on where I'm at. Also, I've been in Chicago, and Mac|Life is in San Francisco, so it would be interesting to know how this works out where we might really get lost-- out in the country, farther away from cell towers.
Still, while it's not as precise as real GPSers might like, the Locations feature is pretty amazing for what it is. Your iPhone doesn't know exactly where it's at, but it knows close enough to get you where you're going.
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