priorities
The apple iphone CERTAINLY uses GPS satellites for a location fix,
THEN it will use the aGPS and cell tower/wifi triangulation data to either confirm or GET A fix if the GPS cannot get an accurate reading, or ANY reading for that matter.
So, indoors but with a cell/data signal, the phone will attempt to use the cell tower triangulation which can be VERY GROSS indeed.
Also, remember that GPS accuracy is a combination of somewhat gross LAT/LON data, like with 3 square meters or worse, and then a software refinement that hopefully gets the data more precise.
true PND devices for mapping, routing, driving use the logic that if it THINKS you are on road A (even though the data accuracy MIGHT have you off by 20 feet or so) AND you are travelling at 25 MPH, then it will SNAP you to the road it thinks you are on.
When roads are close to each other, like alleys and such, I have OFTEN been on the main road and not the ALLEY even with the best PND's out there.
IMHO, the GPS on the iphone when it CAN GET a signal from the SKY, it is pretty spot on