GPS doesn’t. It’s really flaky if you don’t have a clear view of the sky.
However, most GPS systems are augmented. For instance, they can use accelerometers to know the speed and direction of travel and thus extrapolate from the last GPS position.
So when you’re in a tunnel your GPS can’t locate you, but the positioning system takes the last GPS read and adds your movement since then, plus the assumption you’re still on the same road, and plots your position in the tunnel.
These “inertial” navigation systems actually predate GPS, but they loose accuracy over time from when they were last calibrated at a fixed position.
Edit: as mentioned by many, smartphones have very basic estimation this way – they can’t estimate position accurately long after loosing connection. And phones also use a few other techniques to augment GPS like WiFi (there’s essentially a shared list of WiFi base stations and their locations), Bluetooth and cell phone towers.
Edit2: I’d like to emphasize this bit
> assumption you’re still on the same road, and plots your position in the tunnel.
Inertial navigation, even with expensive big systems, is not very accurate. Assuming you’re sticking to the road network is pretty key to making it work well (plus you can probably assume they’re travelling at roughly the same speed). It often freaks out if you’re in a complicated tunnel network with forks and turns offs
Edit3: leaving lose as loose for all the redditors who need to point it out 🙂
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