Did you know you can use your phone as a GPS device (even if you don't have GPS receiver in it) ? Well, I wanna say YES, but it's more like "kinda, but it's pretty cool".
So, what they're doing for some time now (in various mobile phone/maps applications), is to check the cell towers around you and use that info to triangulate your position. (for example, you can try the Mobile Google Maps to see this in action)
If your mobile phone is wifi enabled however, you can add more precision to this, by using an application called Navizon (free for personal use). What it does is the same thing with the cell towers, but it also uses the wifi hotspots around you (if any) to help determining your position.
I've played with it almost the whole weekend, and it worked pretty well. It even has some neat features like friendlists (so you can see where your buddies are at any time if they are using it), uses various satelite/road maps to display your position etc.