It its current form Loopt is a niche product because it requires GPS. The salient feature of "My Location" is that it doesn't require GPS - this is what make it a game changer.
So, in mobile handsets there are three types of GPS. Standalone, mobile based, and mobile assisted.
Standalone is the type of GPS you are referring to where the phone uses only the onboard GPS receiver. This type of fix is slow and generally does not work indoors. It also uses a lot of power. When you get a fix, it's usually pretty accurate, but you don't often get one. Generally only iDen (Nextel phones) support this.
Mobile assisted fixes are where the phone gathers all the data it can (GPS satellite signals it can see, current cell tower and signal strength, etc) and sends it to a computer run by the carrier that does the actual math. This type of fix is really fast, usually works indoors with good accuracy and uses the least battery. It is however more expensive for the carrier computationally.
Mobile based fixes are when the phone uses almanac data from the carrier (which GPS satelites should be visible, the location of the current cell tower, etc) to calculate the phone's position. It only asks the carrier for new information every few hours. This type of fix is reasonably fast, frequently works indoors, and is fairly accurate.
Finally there is cell tower information which works instantly and is almost never acceptably accurate. It is not related to GPS at all.
Loopt uses whatever is available in order of accuracy. We prefer mobile based and assisted fixes (available on almost all CDMA devices released in the past 2-3 years), and fall back to standalone GPS and cell tower only when necesssary.
Users who mainly get cell tower fixes are usually not satisfied with the accuracy. We do our best to do better than cell tower, and so far have not released on any devices that only support cell tower.
They all support GPS for the purposes of E911, but I don't think most of the phones that triangulate position from tower data support GPS for application developers or anything other than E911. http://electronics.howstuffworks.com/gps-phone2.htm
It doesn't matter whether they do or don't. The problem with GPS receivers is that they do not work reliably indoors. If Loopt relies entirely on GPS to locate users then this offering from Google is superior.