This database of hot spots lets Skyhook yield latitude and longitude data even when a user is indoors, and at a level of spatial resolution that's difficult to achieve with GPS alone--down to meters, not blocks.

The second challenge that developers of geo-aware applications must solve is how to translate geolocation data into something meaningful to the user, such as "San Francisco, California" or "The Googleplex."

SimpleGEO currently offers a service for application and Web developers that turns latitude and longitude information into addresses, but that's only the beginning. Cofounder Stump says he is in talks with a number of providers of geo-data to make their libraries of data available to developers, and ultimately users. "If you had an interesting location data set, you could feed into our system and resell it," says Stump. "We're creating iTunes for geo-data."

Perhaps the biggest remaining issue is protecting users' privacy. Laraki believes that the best way to solve this problem is through simplicity--instead of giving the user a maze of settings, they need to be able to easily decide whether to transmit their location or not.

The final challenge is figuring out the best way to present geo-aware data effectively, a user interface problem that Laraki and Gil refer to as the "ergonomics" of the geolocation experience. Eventually, for example, Twitter could be smart enough to automatically generate the hashtag #sxsw for tweets issued from a small section of downtown Austin, TX, when the annual South by Southwest technology convention happens there.

While geolocation has obvious utility for mapping, local news, weather, and social networking, some programmers believe these applications are only the beginning.

"There are some extremely interesting and exciting apps coming down, one built on our technology, that will allow people to further integrate the virtual and real world," says Stump of SimpleGeo. His company has built a software development kit that lets app developers drop augmented reality features into their applications with just a few lines of code.

Augmented reality involves overlaying virtual objects on top of the video feed a smart phone user sees. Stump believes it will completely alter the world of gaming."We have gaming startups working with our technology who are talking about everything from using weather data to alter gameplay to using census data to alter the value of virtual goods," says Stump.