When you activate and approve “Geolocation” the locationbased data of your IP-address and possibly nearby wireless access points or data from the GPS receiver of your mobile device will be used to get an estimate of your location. Accuracy varies greatly from location to location. An important note: Your data will not be stored or transfered to others without your permission.
The purpose of this tool is better usability. You can detect your current position (for a new placemark) with a single click.
More info can be found under W3C Geolocation API.