Apple iPhone OS 3.1 - Manual (Page 173)

Compass
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Getting Compass Readings
The built-in compass (iPhone 3GS only) shows which direction you’re facing, along
with the geographical coordinates of your current location. You can choose magnetic
north, or have Compass adjust the declination to show true north.
Important: The accuracy of digital compass headings may be negatively affected by
magnetic or other environmental interference, including interference caused by the
close proximity of the magnets contained in the iPhone earbuds. The digital compass
should only be used for basic navigation assistance and should not be solely relied on
to determine precise locations, proximity, distance, or direction.
The compass needs to be calibrated the first time you use it, and may need to be
calibrated occasionally after that. iPhone alerts you whenever calibration is needed.
Calibrate iPhone: Wave iPhone in a figure eight. You may be asked to move away
from a source of interference.
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