GPS stands for Global Positioning System. This system is based on satellite constellations.
Basically, a receiver that receives signals from at least 4 satellites embedded with a special atomic clock can, by calculating propagation time of these signals between them and itself, calculate precisely its tri-dimensional position. That sounds magical; it is just trigonometric.
We won't get into the details of this process; instead focus on the parsing of data coming from the GPS modules. You can get more information from Wikipedia: http://en.wikipedia.org/wiki/Global_Positioning_System.
The Parallax GPS Receiver is based on the PMB-248 specification and provides a very easy way to add position ...