Revelations from the device emulator included with Apple's current iPhone SDK indicate that the company has added support for true GPS hardware to the platform. This functionality could show up in the form of built-in GPS hardware, a dock-connected peripheral, or not at all -- but the software is ready.
As discovered by user Steffen Voigt, the locationd component of the current iPhone emulator includes references to NMEA. NMEA is a data specification for communication between various location sensing devices, particularly GPS units. Per this GPSinformation.org page:
"Most computer programs that provide real time position information understand and expect data to be in NMEA format. [...] All proprietary sentences begin with the letter P and are followed with 3 letters that identifies the manufacturer controlling that sentence. For example a Garmin sentence would start with PGRM and Magellan would begin with PMGN."
locationd also makes direct references to satellite-gathered information, with strings mentioning satellite status, latitude, speed, magnetic variation, etc.
Other strings mention GPS time, type, position and accuracy.
Location sensitivity on the iPhone is currently limited to triangulation based on the proximity of cellular signal towers and mapped WiFi access points. iPhone OS 2.0 will add a new live location tracking feature that will automatically track the user?s current location in the Maps application on a persistently updating basis. So, for instance, driving down Broadway in New York with an iPhone would result in a constantly moving blue, pulsing ball indicating your current location. A genuine, hardware-based GPS component would trump this functionality.