The accuracy of the dot will vary on just how location services is getting its information. If it is able to receive GPS satellite timing signals and actually compute a GPS fix, then yes, it would be accurate to within feet.
If it is showing a huge uncertainty radius then it must not be able to receive actual GPS data, so it may well be using a nearest cell tower, which could be several miles away, making the overall uncertainty huge. Location services will do the best it can with the location data available - GPS if available, wifi-node hardware address if available, nearest cell tower if that is all it can pickup.
Bottom line - it is what it is. The fix shown is the best possible and with whatever uncertainty inherent to it, based on whatever data the system can get access to. Sometimes, yes, the location estimation may come with a huge degree of uncertainty, and the dot is merely the center of that radius of uncertainty - the device could be anywhere in that.