If you own a device that doesn't include GPS capabilities like an non 3G iPad or perhaps the more current Kindle Fire, you might wonder how such devices work with location tracking services. It's rather interesting.

How is this possible on a Kindle Fire? It's all thanks to Wi-Fi magic!
Some company like SkyHook decides to collect and store perfectly public and non-intrusive information on the location of millions of Wi-Fi signals. The signal strength interaction between these locations is unique anywhere a reading is taken. If you have 2 random Wi-Fi signals the strength of signal A is strong and the strength of signal B is weak, while you stand closer to A. That's a signature. Now, if you suddenly shift and stand closer to signal B, signal A becomes weak while signal B becomes stronger. That's another signature. If you simultaneously record the street locations of both signatures you finally have the last leg of data that devices can later use to compare their own locations to.
Any Wi-Fi device can check itself for comparison. All a device has to do is to note the same signal strengths from where it is being used at any given moment and report that information back to the central database. Since your device is constantly monitoring and detecting Wi-Fi signals, even when connected to one, this is extremely easy.
At the database, a match in the vast collection is made between your current signature and the one stored earlier. The street address and other information related to it are then retrieved and conveyed back to you, probably on a Google map. And the best part is that all of this takes place in mere seconds.

SkyHook actually hires drivers who will literally drive "every single street" in their city. It's all they have to do. Special scanning equipment in the car does everything else.
Now, for this to work, the database containing all that Wi-Fi signal strength data must be regularly refreshed. Wi-Fi access points (like your own wireless router for instance) come and go quickly so Wi-Fi signatures are, as a result, quite dynamic. They don't degrade or change fast enough that all hope is lost within days, weeks, or even months for making relatively accurate matches, but they do decay and evolve fairly quickly (one article I read on this subject likens these environments to clouds), so you have to keep up on the recording effort. Luckily in the name of a buck the companies that do this sort of thing are committed to the job by sending out entire fleets of mobile data collectors every year. Also, while I do the achievement no justice by merely blurbing this extra point, Android OS smartphones also provide the same data sans wheels. The more Wi-Fi signals they record and the more regularly they update, the more accurately locations are derived.
In all this turns out to be a good bargain for device manufacturers that don't want to drive up the cost of their device by building in GPS technology yet at the same time want their customers to be able to take advantage of location based services. Customers don't wind up settling on the whole with this arrangement. Wi-Fi based triangulation solutions are said to be superior in dense urban areas that GPS signals struggle with.