The Google IO 2013 brought the answer:
- WiFi (the main sensor)
- GPS (problematic, includes reflections)
- barometer (will determine the floor in the future)
- accelerometer
- gyroscope
Source: https://www.youtube.com/watch?v=oLOUXNEcAJk
"We actually combine a lot of different sensors to give you that one estimate; we use the WiFi, we use GPS. We use the sensors (that's the accelerometer, gyroscope on your phone, the barometer as well)... the one that dominates ... is the WiFi".
Many thanks to Waleed & Sarah for the presentation.