I have my Droid and a real compass sitting next to each other on my desk--and they both show the same direction. However, there are two points to remember: first, the Droid's compass is a very sensitive magnetic sensor, thus it will show usually wrong direction inside the car or next to any large magnetic bodies or devices (monitors, computers, power supplies, appliances etc.) Second, you need to recalibrate it every so often by making slow figues-8 in the air for a few times in the open without any interfering magnetic bodies nearby, until the magnetic field strength values in the GPS Status screen, a free Market app, are almost the same, like 52/53 or so. The best way to gain confidence in your Droid is to buy for a few bucks a decent compass--and compare.