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By getting strong signal when observing in GPS
Trouble for the GPS signal doesn't end when it gets down to the ground. The signal may bounce off various local obstructions before it gets to our receiver.
This is called multipath error and is similar to the ghosting you might see on a TV. Good receivers use sophisticated signal rejection techniques to minimize this problem.
Multipath Error
The whole concept of GPS relies on the idea that a GPS signal flies straight from the satellite to the receiver.
Unfortunately, in the real world the signal will also bounce around on just about everything in the local environment and get to the receiver that way too.
The result is a barrage of signals arriving at the receiver: first the direct one, then a bunch of delayed reflected ones. This creates a messy signal.
If the bounced signals are strong enough they can confuse the receiver and cause erroneous measurements.
Sophisticated receivers use a variety of signal processing tricks to make sure that they only consider the earliest arriving signals (which are the direct ones).
Problems at the satellite
Even though the satellites are very sophisticated they do account for some tiny errors in the system.
The atomic clocks they use are very, very precise but they're not perfect. Minute discrepancies can occur, and these translate into travel time measurement errors.
And even though the satellites positions are constantly monitored, they can't be watched every second. So slight position or "ephemeris" errors can sneak in between monitoring times.
Ephemeris Errors
Ephemeris (or orbital) data is constantly being transmitted by the satellites.
Receivers maintain an "almanac" of this data for all satellites and they update these almanacs as new data comes in.
Typically, ephemeris data is updated hourly.
There are a couple of ways to minimize this kind of error. For one thing we can predict what a typical delay might be on a typical day. This is called modeling and it helps but, of course, atmospheric conditions are rarely exactly typical.
Error Modeling
Much of the delay caused by a signal's trip through our atmosphere can be predicted.
Mathematical models of the atmosphere take into account the charged particles in the ionosphere and the varying gaseous content of the troposphere.
On top of that, the satellites constantly transmit updates to the basic ionospheric model.
A GPS receiver must factor in the angle each signal is taking as it enters the atmosphere because that angle determines the length of the trip through the perturbing medium.
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Intentional Errors!
As hard as it may be to believe, the same government that spent $ billion to develop the most accurate navigation system in the world intentionally degraded its accuracy. The policy was called "Selective Availability" or "SA" and the idea behind it was to make sure that no hostile force or terrorist group can use GPS to make accurate weapons.
Basically the DoD introduced some "noise" into the satellite's clock data which, in turn, added noise (or inaccuracy) into position calculations. The DoD may have also been sending slightly erroneous orbital data to the satellites which they transmitted back to receivers on the ground as part of a status message.
Together these factors made SA the biggest single source of inaccuracy in the system. Military receivers used a decryption key to remove the SA errors and so they're much more accurate.
Turning Off Selective Availability
On May1, the White House announced a decision to discontinue the intentional degradation of the GPS signals to the public beginning at midnight. Civilian users of GPS are now able to pinpoint locations up to ten times more accurately. As part of the Presidential Decision Directive goals for GPS, President Clinton committed to discontinuing the use of SA by. The announcement came six years ahead of schedule. The decision to discontinue SA was the latest measure in an on-going effort to make GPS more responsive to civil and commercial users worldwide.
The bottom line
Fortunately all of these inaccuracies still don't add up to much of an error. And a form of GPS called "Differential GPS" can significantly reduce these problems.