Here's the disclaimer from my phone: "Location may use sources like GPS, Wi-Fi, mobile networks, and sensors to help estimate your device's location. Google may collection location data periodically and use this data in an anonymous way to improve location accuracy and location-based services."
They have had similar-worded ones for a while now.
IIRC basically if the phone has GPS enabled it'll upload the list of visible APs from that location, so they can use that as an estimate for when a phone without GPS is nearby.
I recommend spending a little time searching the web and Google's Android developer pages for more, but here's a Quartz article that gives a decent overview: https://qz.com/1131515/google-collects-android-users-locatio...
If you're interested in being able to find your location under the most possible circumstances, you can't rely just on GPS because there are so many situations where GPS won't work.