Called “My Location”, the beta is intended for mobile phones and handheld devices that do not have GPS hardware. The software receives broadcasts from mobile towers to determine the phones location down to 1000 meters (ten city blocks). The software uses the same method the phone use to make and receive a call. The My Location feature is currently available for most web-enabled mobile phones, including Java, BlackBerry, Windows Mobile, and Nokia/Symbian devices.
Google explains, We’re still in beta, but we’re excited to launch this feature and are constantly working to improve our coverage and accuracy.
Their web page has a YouTube video that explains how it works.