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It does not mean the GPS is on.

It's just has data preloaded into the phone so when the GPS is used it's ready to go.

It does tend to keep the network up doing this though that does add to battery drain but not that much.

I tried stopping the service (with MemMaid) to save battery (i.e. by allowing network to shut off) and then could not get the GPS to work (or at least I didn't wait long enough for it to find sats on it's own which it would eventually do).