AirTags "found" but not found

Dallas I'm having the EXACT same problem and for almost the exact same reason. In my case the ring fell apart from the dog's collar, losing the Airtag along with the id tag, rabies tag, and microchip tag. I found all 3 of them this morning on my back patio, but the airtag is nowhere to be found and it should have been right with these 3 tags. My phone can't find it, yet it keeps telling me it here with me. It makes no sense to me how it can be reading the tag to send me information that it's located but yet won't read it to do an actual location. It HAS to be in my SMALL back yard in the open, but I can't find it and the Iphone is worthless at locating it. Very frustrating.

An Apple AirTag uses Bluetooth to send it location. An iPhone (yours or someone else's) must be within 30-40' of the AirTag to pick up that signal. In turn, that location information is forwarded to the Apple servers. That is where you can "see" it in the Find My app.

AirTags are not designed for tracking ... either people or pets. If that is your goal, you may want to consider getting a dedicated tracker that relies on GPS, not solely on Bluetooth.

Should a neighbor come across it, and if the collar does not have a dog tag, you can make it easier for whoever finds it to return it to you by placing the tag into Lost Mode.

In case you weren't aware, this mode will allow you to provide the Finder with a limited amount of contact information to help them get a hold of you.

Of course, your AirTag must still be available on the Find My app's Items tab.

Ref: Mark an AirTag or other item as lost in Find My on iPhone - Apple Support

A few possibilities here:

1. None of the "passing" iPhones had both Bluetooth & "Find My Network" enabled. Note that the latter should be enabled by default, but some folks do not want their phones participating with this service.
2. "Find My Network" was disabled on your phone.
3. The AirTag's Bluetooth "beacon" sends out its location approximately every 10 mins.
4. The AirTag was in a location that prevented it Bluetooth signal from traveling very far.
5. The AirTag's battery is weak or exhausted. (They only have an expected lifespan of 1 year, but is dependent on environmental conditions.)
6. This particular AirTag is defective.

The address can only be updated if there is another iPhone nearby and it usually needs to be about 30 feet from the AirTag. If you are getting the Not Reachable message then there are no other devices nearby to transmit the play sound command. The accuracy of the location provided would be dependent on the device that is close to it. If the device has Location Services shut off or not using Precision Tracking, then the location returned may be from the nearest cell tower used for getting the location instead of the more accurate GPS location. I would suspect 1 of those 2 locations that are returned is the accurate location and if you get within the 30 foot range, it would update from your device and you should be able to play the sound. You have a limited amount of time to find it this way until the battery dies.

I know the following is a stretch, but if you have ever used a "training" or "perimeter" collar with your dog, you know they will emit a beep ... or beep, then a mild shock. Each animal has their own "personality" and respond to these differently.

So, in this scenario, they may try to get rid of the collar with whatever method becomes available to them. Again, not saying this is what is happening here. It's just that your AirTag is designed to "beep" after a certain amount of time (around 3 hrs) of being separated from their host iPhone. The animal can be confused by this is all I'm saying ... and why I have been discouraging folks for using them with their pets and get a GPS tracker instead.

Great information provided by Tesserax and should be the definitive guide when troubleshooting AirTag tracking.