The network location and GPS location are totally different, and use different technology. You can get your location from your phone network, but it isn't that accurate. I've used Google maps and it's shown my location anything up to a mile or so away. This was on 3UK. I'm currently on T-Mobile and that shows me at the end of my road, about half a mile away. This is not accurate enough for sat nav etc. I believe it looks to the mast your phone signal connected to.
Switch the GPS on and it uses satellites to triangulate your position (why you need a minimum of 3 satellites to get your position.) This is a lot more accurate, typically down to 20ft. First fix on a lot of devices usually takes a couple of minutes, but if you use the GPS every few days you will get a lock a lot quicker, sometimes in seconds. (I believe the GPS data is valid for up to 7 days. Basically use it every 7 days or less and you will be getting a hot (quick) fix, any longer and you'll get a slower "cold" fix) If you want to know more about this and why let me know and I can point you to some more detailed explanations.
You can use the GPS without a phone signal/no 3G. You will need to have the maps on your device though. I have Navigon on my phone and used it on holiday last year in parts of Devon where we had no phone signal at all (HTC Desire) and in Scotland this year (SGS2 and wife using my HTC Desire) Both worked flawlessly, easily as good as a dedicated sat nav.
In summary, the location provided by your phone company is usually good enough to see roughly where you are on Google maps (typically within a mile) and is fine for check-ins on Facebook and for returning details about local products from bar code scanning apps (Red Laser). If you need to know exactly where you are for Sat Nav, Geocaching, logging your jogging/cycling routes, GPS is a lot more accurate.
They both use different forms of technology and can be used independent of each other.