The iPhone 4 have an Assisted GPS (A-GPS), which means that instead of a straight satellite to iPhone. It is instead satellite to cellphone tower to your iPhone. Since the cell towers do the calculating, the calculations are faster and requires less processing power which uses less power. A-GPS also does not require line of sight for you to able to get your location. However, it is it not as accurate as GPS (more accurate with more towers, but terrible in very low coverage) and of course you are screwed if you don't get service.
This is inaccurate information, and is incorrect concerning certain things.
A-GPS ("Assisted GPS") is a GPS system that can utilize cell phone tower information and triangulation to speed up the initial position acquisition. A-GPS is no more or less accurate than regular GPS, it just has the added benefit of being able to locate an accurate position much faster than using satellites alone.
A-GPS does NOT mean that position information flows from a satellite to a cell phone tower to your phone... it simply means that your phone is first contacting cell phone towers for an approximate position (or, rather, the location in the sky of satellites that it can use), and using that approximate position coupled with ACTUAL GPS satellite readings to be able to pinpoint you in a short amount of time.
If the iPhone did NOT use A-GPS, you could expect, when walking outside with your phone for the first time, a delay of around 5 minutes or more for your phone to accurately locate your position. This would be standard satellite-only GPS, and while it can be EXTREMELY accurate depending on how many satellites it can receive information from, it is usually slow in acquiring an initial position (though subsequent position updates are quicker).
The accuracy of your position does NOT rely whatsoever on the TYPE of GPS acquisition used (A-GPS vs. GPS), it relies on the accuracy and quality of the GPS chip contained in the phone. A-GPS and GPS differ only in how they acquire their initial signal, and how quickly they can update your position using information from both cell phone towers and GPS satellites, or GPS satellites alone.
The iPhone (as with all other A-GPS devices) will still be able to calculate your position VERY accurately using satellites alone in situations where cell phone coverage is lacking -- it will just fall back to using satellites alone, which can take a long time to fix on your position... not to mention, without cell phone towers, you can't download map imagery, so while the phone may "know" your location using GPS satellites alone, without data, it cannot display this information to the user in any kind of usable fashion (no data = no maps!).
http://en.wikipedia.org/wiki/Assisted_GPS
To answer your question, yes -- some GPS tracking applications have the option of using them while no data connection is available. You would download the maps while you're in an area of good network coverage (wi-fi, 3G, etc.), then use those downloaded maps while you venture out into the backwoods, depending on GPS from satellites alone.
A simple Google search for "iphone offline maps" turns up a bunch of hits, such as:
http://www.thedigitaltrekker.com/2010/09/a-few-iphone-offline-maps-apps/
