My understanding is that you need to have an active internet connection for this. Your wifi will detect the name of all routers around. These and there coordinates are in Google's huge database (or Apple's). So if you are not near your wifi you would need a 3G connection to receive the coordinates of the closest router.
I tested this. When I drove with GPS disabled but 3G on I always get quite exact coordinates in well populated areas. When I put 3G off - no new data anymore. 3G on - data keeps coming.
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