For some reason this is not working for me, I tried it on my connection and my neighbors anyone know why?
Yes. The service that Google maps uses has not driven down your street to map the GPS locations of all the wifi nodes it could find. I believe it is Skyhook, or something like that. If you know their web site you can add your wifi's mac address to theri database, and with luck they will eventually add it to their service so you can at least get locate to work near your house.
Actually the GPS you are talking about only pertains to the iPhone. Since this is in the iPod touch forum, I'd think he'd have an iPod touch, which uses nearby Wi-Fi signals to get your location. Does it give you an error message that says something like "could not find your location"? If so, there are probably not many strong wi-fi signals that could give your location.
You can go to skyhooks website and add your address to your wifi name.