I'm not expert, but I've been following this thread for a long time, and I've played with the same gadgets. I have a "wi-fi only" iPad.
Like you, I've noticed that my iPad "knows where it is" pretty well. But it's NOT accurate enough that I would navigate with it. Probably not a car and certainly not an aircraft!
But there's no question that, if you turn wi-fi off, or put it on "airplane mode" (turns off all R.F. sources except, I suppose those eminating from the chip), you can't get a map to display on Apple Maps or Google Maps or any other app that downloads its map from the net.
The uncanny thing I have noticed about it is that, even in airplane mode (no wi-fi, no bluetooth, no phone signal...dosen't even have a sim card, and no gps signal from my Bad Elf), in apps that use a downloaded (onboard) map, like a hiking map that I use that downloads USGS Topo Maps, IT CAN STILL FIND ITSELF PRETTY WELL! Not precisely for sure, but it still has a rough idea of where it is (within a few hundred yards)!!! I REALLY don't know how it does that!! I have also observed the same thing with Google Earth with the iPad in Airplane Mode.....turn it on and it asks you if you want to "continue without the network?". If you hit yes, it will take you to pretty close to where you are!! Uncanny!
Makes me wonder if it doesn't have SOME kind of inertial nav ability to reckon where it is from it's last wi-fi location fix (and it CAN locate itself with wi-fi signals when wi-fi is on, in the area EVEN IF YOU ARE NOT connected to that perticular wi-fi network! I have verifed that. I have also read that it uses Bluetooth signals in some way to calculate its position, but that seems pretty unlikely to me as they only have a range to 30' or a bit more under most conditions!.