In the case above, I don't think the iPhone is passing the iPad anything and there is no GPS involved. The iPad is estimating it's own position based on a database of Wifi MAC addresses. If the iPad can see a router with MAC address xx:xx:xx:xx it then queries the database to see where the router is located and know that it must be within 200 feet of the position of that Wifi Router. If it doesn't have the data base loaded, it could be using the iPhone network connection to download the wifi database, but I think that at least the local area is cached on the device. This works with a Wifi only iPad with out being tethered, or even on a laptop. If you can see multiple wifi networks, then maybe it can do some triangulation based on RSSI to get a better position, but that only helps so much:
Of course this doesn't work at all where there are no wifi networks.
Wi-Fi positioning system - Wikipedia
en.wikipedia.org
Of course this doesn't work at all where there are no wifi networks.
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