Each GPS satellite transmits data that indicates its location and the current time. All GPS satellites synchronize operations so that these repeating signals are transmitted at the same instant. The signals, moving at the speed of light, arrive at a GPS receiver at slightly different times because some satellites are farther away than others. The distance to the GPS satellites can be determined by estimating the amount of time it takes for their signals to reach the receiver. When the receiver estimates the distance to at least four GPS satellites, it can calculate its position in three dimensions.
There are at least 24 operational GPS satellites at all times. The satellites, operated by the U.S. Air Force, orbit with a period of 12 hours. Ground stations are used to precisely track each satellite's orbit.
Determining Position
A GPS receiver "knows" the location of the satellites, because that information is included in satellite transmissions. By estimating how far away a satellite is, the receiver also "knows" it is located somewhere on the surface of an imaginary sphere centered at the satellite. It then determines the sizes of several spheres, one for each satellite. The receiver is located where these spheres intersect.
Because GPS receivers do not have atomic clocks, there is a great deal of uncertainty when measuring the size of the spheres shown in the diagram above. In the figure at left, the dashed lines show the actual intersection point, and the gray bands indicate the area of uncertainty.
Although the distance to the satellites can only be roughly estimated at first, a GPS receiver can precisely calculate these distances relative to each other. Because the relative size of the spheres is known, there is only one possible point where they can intersect. 

In this diagram, the solid lines indicate where the GPS receiver "thinks" the spheres are located. Because of errors in the receiver's internal clock, these spheres do not intersect at one point.  
The GPS receiver must change the size of the spheres until the intersection point is determined. The relative size of each sphere has already been calculated, so if the size of one sphere is changed, the other spheres must be adjusted by exactly the same amount. Three spheres are necessary to find position in two dimensions, four are needed in three dimensions. 
GPS Accuracy
The accuracy of a position determined with GPS depends on the type of receiver. Most handheld GPS units have about 1020 meter accuracy. Other types of receivers use a method called Differential GPS (DGPS) to obtain much higher accuracy. DGPS requires an additional receiver fixed at a known location nearby. Observations made by the stationary receiver are used to correct positions recorded by the roving units, producing an accuracy greater than 1 meter.
When the system was created, timing errors were inserted into GPS transmissions to limit the accuracy of nonmilitary GPS receivers to about 100 meters. This part of GPS operations, called Selective Availability, was eliminated in May 2000.
All images on this page ©1998 Smithsonian Institution
Source: Smithsonian Institution