Location services are a set of different methods to determine the current location of a devices (and its user). This location data might be stored in pictures taken or used for navigation. The available methods vary on device type.
Signatures (SSIDs) of WLANs in the current location are polled and sent to a database which has also the location information of all known WLANs. Such database services are provided by Google and Skyhook Wireless [Archived 2011-12-22 at the Wayback Machine]. Apple claims that they are not using these services since iOS 3.2, in favor of an in-house service. An active Internet connection is required to send signatures to the database and get location coordinates in return. This is the only method used for iPod touches.
A-GPS (Assisted GPS)
This method uses GSM/UTMS protocols to quickly identify the approximate current location. The GSM/UMTS network is organized in cells, and from the currently subscribed cell ID it is possible to get a first estimated guess on the current location. If neighbourhood cells can be taken into account as well a more precise location estimation might be possible. In addition, these direct location information network operators may also provide so-called almanach data for faster satellite GPS synchronisation.
However, none of these services are mandatory standards. If provided, network operators usually charge for these services and this is one of the reasons why costs are generated even without initiated phone calls. Another disadvantage is that response is rather inaccurate, at least insufficient for navigation purposes. Advantages are fast response and coverage in buildings.
Satellite GPS is the most accurate method and hence suitable for even navigation purposes. On the other hand it may take up to 10 minutes to "fix" and will most likely work only outdoors. In iDevices, various (different) chipsets are used for GPS, but they are all controlled by the baseband firmware. So if an iDevice doesn't have a baseband, it doesn't have a GPS.
If the iPad baseband 06.15.00 is installed on iPhone 3G or iPhone 3GS it will result in loss of (satellite) GPS functionality. The reason behind this is the iPhone 3G, iPhone 3GS, and iPad using the X-Gold 608 for GSM/UMTS communications, but different GPS chips (BCM4750 in the iPad, and Infineon PMB2525 in the iPhone 3G and iPhone 3GS). So the iPad baseband is presumably missing drivers for the Infineon PMB2525. As baseband is totally separated from rest of the iPhone logic (they only communicate over a serial link), there is no alternative way to address the unused GPS chip. Meanwhile, all hopes have been buried of a downgrade option for iPad baseband.