I know that a lot of us have wondered how GPS works. How does a bunch of satellites know where I am?
Here is an excellent discussion from Dale DePriest. He references Garmin, but the theory works for every kind of receiver. Knowing how it works may help you understand when it doesn't.\
Once your receiver knows where it is, it communicates that to the Axim software by NMEA statements. I'll look for an equally simple explanation of them, too.