AKRO is right a GPS integrity message is needed before there is an accident, especially if there is a DR capability built in.
There is no DR capability built in. The app uses location data sent by the device. If the device thinks there is a good signal, it will display the position and the estimated error. If there is no signal, it will display "--" in the boxes, simple as that.
The internal GPS on the iPad 3G has shortcomings when going to places outside coverage, so best to get an external one. Some people report brilliant reception at FL350 and some report crappy performance at 4500ft.
Take note of the "Not for use in Air Navigation" people; your Gamin says a similar thing when you turn it on and press "Accept". Until CASA say otherwise, please use as informational/safety backup device - just like you're meant to do with your non-TSO'd Garmin.
Note: If CASA copy the FAA rules like they say they are doing now, then we may be able to remove the "Not for Air Navigation" message, but I'd suggest from reading the documents that there will still be a warning regarding use of "own-ship positon" features on maps. It may be more time again before they approve this, and it may be external GPS only. Who knows.