The Institute said that WLAN technology is more precise than GPS and can access spots such as subway stations, galleries and narrow streets; and it should be installed in cities with existing a high number of hotspots (such as Nürnberg has, more than 2000). This allows the system's precision being 3 meters, instead of 10 meters for GPS.
The navigation system uses the signal that WLANs broadcast in different spots around the city as well as their location and stores it in a central computer. Then the navigational system finds the position by detecting these public and private wireless networks. Since it requires no user identification, it can't trace back the location of a certain user.
[Source: EFE via Madri+d]