True. Check out Navizon for example, embedded in mgmaps.
Mobile GMaps - Google Maps, Yahoo! Maps and Windows Live Local on your mobile phone
Without GPS, it tells me my location within a mile or so using the included Navizon technology. I don't think it's interpolating. My guess is it's figuring out what tower it's closest to, and looking up the tower location in an online database. I just made that up. Navizon can also locate you on the basis of your wifi connection, if you're connecting through a wifi device that's in their database. This is a really nifty application by the way, and it includes GPS functionality and has some neat peer-to-peer location concepts, but it sometimes crashes my 8700.
Navizon - Peer-to-Peer Wireless Positioning
A Navizon thread
is already underway.