Simple version:
GPS has errors, the position a GPS gives you will be wrong.
If you put two GPS receivers next to each other they will give you two different positions BUT the distance between the two positions they give you will be smaller that the distance between where you are and where they say you are.
Differential GPS is where you put one of the GPS receivers in a known location and measure its position error and then assume that your second GPS has exactly the same error in it's output. In effect you are measuring the difference in position between the two GPS systems.
In reality it's a little more complex than that but it comes down to the same basic idea, that since some of the error is the same on both GPS units if you can measure that error you can get a better position.
Commercial gps units are not that accurate. Most have approx 5 meters of accuracy.
differential gps uses an antenna that's on the ground. The gps unit communicates with the satellite, however it also communicates with the antenna. This allows the location that the gps transmitts to be more accurate.
edit: other people have much better answers than mine
see adevial's and A's answers
Record the GPS location of somewhere you know. Record the GPS location of somewhere you don't know, and add the difference between the real location of the first place and the GPS location of the first place. You can do that in real-time if you transmit the difference signal via radio, or off-line if you record it with a timestamp.
Hope that if the two places are close together, any error (ionospheric distortion, or - originally - SA) will affect both readings equally and cancel out.
Try the site below, but why you couldn't look that up yourself, I don't know!
Read all these line by line......
http://en.wikipedia.org/wiki/Differentia...
how differential GPS works . simplest description.
