The blue-dot is actually an approximation of your location based on triangulation from multiple towers. You'll notice the blue dot isn't always at the same place if you move around a bit.
I've found it doesn't work too well when I'm right next to a tower (presumably because then I'm too far from other towers to triangulate). Google is continually improving the algorithm and adding more locations of cell towers, so accuracy should be improving.
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Originally Posted by Sith_Apprentice
that blue dot is actually the tower, you are within that blue circle. and 1700m is quite a ways. its nice for a non-gps alternative but not really anything else than that
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