this is wifi positioning and its actually quite clever. Take a look at your position in google maps when you have wifi and gps off, then switch wifi on and even if it doesn't connect to a newtwork, provided it can see some networks then your position will improve significantly. It almost puts me sitting at my desk at work (I do not connect to a wifi network, just have wifi switched on) but when just using cell towers it thinks I'm 300 metres away. I've found google now is only really useful if I leave wifi on because it knows where I am so the journey times it recommends (I use public transport) are actually sensible. on cell tower positioning only it tells me to walk to the wrong train station! I don't think google now uses gps to save power so wifi is the best bet for accuracy.

I'm not entirely sure how it works but I think all wifi acess points broadcast their location or allow a means to get it without needing to klnow the security. I believe there is a way you can stop a wifi point being used in this way by putting something in the SSID if someone objected to it. It does show that wifi when on and not connected is always searching for signals so I guess leave it off if you don't need it to save power but personally I prefer the improved location I get for google now