Actually, according to Wikipedia (and what I seem to recall from elsewhere) "The iPhone 3G and iPhone 3GS employ A-GPS". That's not quite a true GPS, though it's not triangulation either. However, A-GPS does not work if the phone is not talking to a tower (in fact, it needs to talk to a properly equipped/connected tower). As far as I understand, A-GPS (assisted gps) receives satellite signals directly to the device. However, rather than processing these signals on the device, it forwards them to the special network server which does the actual calculations and then returns the location back to the device. So the current iPhone 3G will not provide GPS functionality when not connected to the network, presumably.
(Interesting, I never tested that - will try later today)
I'm not sure why people are so confused about the iPhone's GPS.
It is TRUE GPS. It's also true that it is aGPS. a being 'assisted'. This actually makes it a better GPS in terms of locking a signal from satellites, than a handheld GPS, or one that does not have cell tower communication capabilities.
Brak is right in that the 'a' part of the aGPS won't work if there is no network, as the phone checks to see where to look in the sky and which satellites will be most appropriate for the region you are in.
However, it simply makes the phone find a fix faster. If there is not network availability, the GPS absolutely works as a dedicated GPS receiver, it just takes longer to get a fix...up to 10 minutes sometimes. The only thing that makes it inferior to any other GPS unit is the size and probably the type of antenna it uses. That being said, I can have the Navionics app on, in my cabin, with the companionway closed, and it's able to get a fix through the small windows out along the coast.
Most likely, the part about aGPS in phones (iPhone, Android, whatever) that is confusing is that the phone needs to have an application that has all the map data stored on the phone itself. Applications on the iPhone like the built in Google Maps, do not cache much if any data...which means you need a network connection to download the map tiles and if you don't have that connection, you will just be a pulsing blue dot on a grey background...just the same as you'd be if you didn't install a map pack on your Garmin. But marine applications like Navionics, or turn by turn driving apps like Tom Tom and Navigon contain all the map data, and need zero network connection to work.