I suppose you won’t allow a web site to locate you over the cellular network or even GPS. But your smartphone probably has a compass in it and there is nothing special about this. But since every webpage can read these values, advertisers could track the geographical direction you are facing at. Probably you have a desk somewhere, at home or at work. You probably put your smart phone on this desk pretty much the same every day so you can read it best. Now there is a good chance, that you don’t face the same geographical direction at home and in the office. You can’t tell where you are on earth, but you can distinguish the directions your device points at – so in fact the desk you are sitting at.
Look at the compass above. With a mobile device, it should rotate and point towards North.
As an example you could see that the user is sitting at the desk in the office and maybe it’s Saturday. Now you could serve an Ad about making holidays or maybe promote his/her favorite pizza ;)
Or maybe the users device is in a tilt position for reading and the direction seems to match the direction from every evening. So the user is probably sitting in front of the tv (maybe it’s late at night) and so you could serve an Ad to guide him/her to a special movie to rent online.
At your desk, your mobile phone points in one direction.
At home, your mobile phone points in definite directions.