Drives me batty that the GPS receiver turns off in Flight mode. WHY?
Flight or Airplane mode will turn off the following;
Cellular (voice and data)
Wi-Fi
Bluetooth
GPS
Location services
If the iPhone is not using Cellular, Wi-Fi, BT etc then GPS isn't required for Apple to keep track of your location.
to cross correlate against Wi-Fi locations and associated MAC addresses etc
http://www.youtube.com/watch?v=GynEFV4hsA0