Skyhook Wireless, the six-year old company, that uses signals from Wi-Fi networks and cell towers to pinpoint a device’s location within 30-60 feet, got its big break a year ago when Apple (NSDQ: AAPL) tapped it to use its software on its iPhones. Apple apparently chose Skyhook because the company’s method can more quickly find a device’s location compared to GPS. The nytimes.com has a lengthy feature on how the service works and on its close relationship with Apple—Skyhook apparently gets a commission for every single iPhone and iPod Touch sold, to date around 37 million. (Skyhook co-founder thought it was a prank when he got a message from Steve Jobs requesting a meeting). The company also has partnerships with AOL (NYSE: TWX), which uses it to allow users to see where their chat buddies are, and with digital mapping firm Navteq. Its software is also embedded on Eye-fi camera cards, which keeps track of where photos are taken.

Analysts see big opportunities—but also threats—for the company as more devices, including gadgets other than phones become location-aware. Telecoms researcher Chetan Sharma said they were “well-positioned” to keep up their early lead, but that it still remained to be seen whether they could sustain their momentum in the next five years, as more competitors entered the space. One of their more formidable competitors is Google’s My Location service, which users a combination of GPS, cellphone towers and Wi-Fi, and which according to a Google (NSDQ: GOOG) spokesperson collects its signal data from several sources, including from phones running its software.

Skyhook’s immediate strategy is to try to get on as many devices as possible. Developers can license its software to create location-based services. It’s also got deals with Broadcom and Qualcomm (NSDQ: QCOM) to put its technology on their chips, and a deal with a “major” netbook makers that has not yet been announced. Morgan is also hoping that its patents and six years of painstakingly collecting data on Wi-Fi networks in 20 countries will help them remain ahead.