How does Apple locate your phone?

I Have recently done some research on how exactly Apple locates its devices by iCloud/find my iPhone app. It's come up with some really interesting results, only the real question is how does apple do it? And does it actually work?

I Was told that Apple uses Skyhook a company/software that helps pinpoint a location, but I wanted to make sure I wasn't being lied to/told out dated info, I learned that Apple doesn't use Skyhook anymore. so this is my understanding of what Apple really does, they take the location from an iPhones GPS and use the wifi you are connected to to help pinpoint your device.

Except for me apparently I across the block, down the street and in someone I have never even met's house. So if someone could help explain in detail how exactly Find My Iphone could be off by more than 500ft That would be very helpfu! Thanks(: or if I have my information wrong, correcting me would also be very helpful!