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Friendjectory allows you to see where your friends are right now. App uses iPhone's GPS receiver and WiFi / 3G to send and receive friend positions. You can add as many friends as you like and see all of them on the map at once.
You and your friends must be running this app to see location updates in real-time. GPS accuracy depends on GPS receiver and physical location. You can look at friend's GPS accuracy to determine how accurate is the current position (by tapping on friends bubble).