The iPod Touch doesn't have GPS. It does have a 'locating' feature, but it does it by determining what wireless (wi-fi) access points are in the vicinity, then comparing those against a database of known access points (Skyhook) and triangulating to roughly determine its position. The Touch doesn't need to actually access the wi-fi sources to 'see' them, but it does need actual internet access through one of them to query the database and update the map. The difference between your Touch and the other guy's iPhone is that he has a full time data connection -- you don't. If his iPhone is the 3G variety, he also has actual GPS built in -- you don't.