The whole "cell tower location" (and even "WiFi Station Location") are used only when you have an app that wants to get a vague idea of where you are. An app can request a lower amount of positional accuracy which will use these other techniques. This saves battery life because cell tower location uses less power than running the GPS receiver.
For my app, I crank the accuracy up to "full", which means that you will always be running off of the GPS (as you can tell be the little GPS arrow showing in the toolbar).
As for the accuracy of the iPhone's GPS vs. others - from what I can say from my own experience - it is about as accurate as any other. It does not have WAAS, but unless your doing a precision approach in an airplane, I don't know that that's important.
Aside from that, the only downside I could see on the iPhone vs. another GPS would be the antenna. If you were in some sort of enclosed, shielded cabin, you may be better off with a device that could support an external GPS antenna. (Actually,*can* use an external bluetooth GPS with my app as well. I've tested this and can recommend one that works well. My guess is you really don't need it. [That is more for people with iTouches or iPads with no GPS receivers in them].)
You could obviously experiment yourself with the built-in maps application. My app will have the same accuracy as the phone's GPS when running it.
In summary - I'd say that the accuracy is very good, on-par with any other device and you'll be happy. I have received nothing but very positive feedback from other users, too.
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