The boys over at engadget put this up while I was working it over, but I’m still gonna hit it. [Curt] sent in the iPhone GPS he put together. He’s using a micro-controller to send the ground toggle handshake we mentioned in the iPhone serial tutorial, along with a small NMEA serial GPS module. After the handshake is completed, the controller hands over the serial port to the GPS output. (Since the handshake only needs the ground toggle, I’d guess that the module is connected to the TX/RX lines all the time.)
By the way, the GPS looks like this SiRF II board sold by spark fun electronics.