It is just so contrary to what Dustin told me at the AT&T store this morning that I wanted to be explicit.
Too funny. When I bought my iPhone the sales rep at the Apple store assured me that GPS would not work when there was no cell signal. I had read so much that was contrary to that; in the end we agreed that the 30 day return policy meant that I would trust what I read and not what he told me :) I think a big part of the confusion is that if you don't have maps pre-downloaded, then when you open a map app it will look like it doesn't know where you are. Apps like Gaia GPS solve that problem by letting you download all the maps in advance.
And last year when I was working with the folks at the genius bar to figure out the battery drain problem with locking the SIM on an ATT iPhone 5, the "master genius" assured me that I could turn Airplane mode on and GPS would work as long as I had WIFI on. I tested that, and as I expected, it doesn't work -- it is true that you get an approximate location as long as you have a WIFI signal, but once you're out of WIFI range then there's no location info.
The iPhone has "Assisted GPS" aka A-GPS . You can read what that means on the wiki article. The iPhone ALSO has standalone-GPS (which is disabled in Airplane Mode) as well as WIFI Positioning system (which gives approx location if you have WiFI signal but are in airplane mode and thus GPS is disabled). WIthout a SIM card (or with card but no cell signal) it will take much longer to get the very first fix after you power up in a new location -- in my experience it's as much as 3 or 4 minutes. But after that very first time, it subsequently takes 20 or 30 seconds to get a GPS read. It's good to know about the slow first fix -- don't panic, just be patient.
Believe me, we folks who care about 1) battery life; 2) GPS reception; and 3) NOT cell signal -- we are so small a group that we are not on the ATT or Apple radar.