The ipod touch does an amazingly good job at finding your current location with no gps and no mobile phone masks. At home we are located to my street!
These,
two articles explain it ... remarkable.
Basically there is a
database of WIFI access points and there locations that have been gathered by Skyhook.
Basically it sounds like they periodically drive around gathering data ... mad. There are
coverage maps and you can also
submit the location of your own router.