So my mom has a wifi connection at her house, you're saying that's where it's getting the gps location?
If that's the case then it should work the same if I'm out and about using my iphone with Mywi?
As Stetrain mentioned, Apple contracted with Skyhook Wireless for WiFi location services:
http://www.skyhookwireless.com/devices/
Their agreement dates back to the very first iPhone. Skyhook Wireless employees literally mapped the location of WiFi hotspots by driving all around the country in specially equipped vehicles that detect a WiFi hotspot AND map each hotspot's GPS coordinates. That information is fed into a database and the original iPhone used that information to allow location services. HOWEVER, the original iPhone also provided cell tower triangulation. But, more important than that, the original iPhone had an internet connection (via cell towers) when it was near a known WiFi hotspot but didn't have access to USE that WiFi hotspot.
You see, without an internet connection, the data from Skyhook Wireless' database can't be downloaded. So, it's not just enough that the WiFi-only iPad be NEAR a mapped WiFi hotspot, it must have ACCESS to that WiFi hotspot.
So, if you are driving down the road (or walking down the street) with your WiFi-only iPad, it can "see" WiFi hotspots all day long but if it doesn't have any access to the internet, the Skyhook database is worthless to the iPad.
The original iPhone did OK with location services but it was actually pretty slow and inaccurate compared to the iPhone 3GS. The addition of a real GPS made a world of difference in accuracy, particularly when the iPhone was near a WiFi hotspot that wasn't in Skyhook's database (new hotspot or a spot where they have switched out their WiFi base station since Skyhook mapped it).
So, back to the WiFi-only iPad... it is even less effective for location services than the original iPhone. It doesn't have a GPS OR a cellular connection to the internet. The WiFi-only iPad cannot be used to navigate from one location to the next unless there are mapped WiFi hotspots along the entire route AND you have full access to those WiFi hotspots along the route.
Finally, regarding your MyFi.... The iPhone and iPad see the MyFi as simply another WiFi hotspot. It will give you a constant internet connection but the MyFi itself won't give location information because it has not been mapped by Skyhook Wireless. However.. if you have both a MyFi connection to the internet (and Skyhook's database) AND you are constantly near mapped WiFi hotspots, you would be able to navigate. But good luck with finding mapped WiFi hotspots as you drive down the highway or explore less densely populated areas.
Bottom line: If you want to use the iPad for navigation, you have to get the 3G version with GPS.
Mark