There's a reason Google can shut down its Street View cars and still maintain a quality geolocation service on mobile devices: it's crowdsourcing the data.
Mobile-phone and some laptop users who use Google applications to get a fix on their position or share their location with friends are helping Google build out a database of Wi-Fi hot spots, the company confirmed Tuesday. Users generally understand when they are sharing their own location with Google or its partners, but they may not realize they are also helping Google match Wi-Fi hot-spot location data with GPS coordinates by transmitting the location of any Wi-Fi access point in wireless range.
When a Google Maps Navigation user, for example, requests a fix on their location, they send Google a list of all the MAC (media access control) addresses associated with wireless hot spots available within range to be checked against a Google database of those addresses gathered through the Street View project, said Steve Lee, group product manager at Google. Wi-Fi hot-spot triangulation is a commonly used method of determining location on modern smartphones, as GPS doesn't always work in urban locations and cell-tower positioning can be inaccurate.
I did a little experiment with this today. I was close to a BT wifi zone, so disabled by mobile network, turned on WI-FI and enabled WI-FI as a location source.
To do this on an Android device you need to go to... Settings > Location
From there check the box that says "Use wireless networks" If you read the text below that you will notice it says...
Location determined by WI-FI and.or mobile networks
I have disabled my mobile network. I them opened Google maps, no map could be displayed because my mobile network was disabled, and wasnt registered on the WI-FI network, but my location was shown on screen, and acuracy to within 50 meters.
Clearly WI-FI can and is being used and although not as accurate as GPS is could be useful.