The primary purpose of WiFi to enhance location information is to bootstrap the download of current GPS orbits (the ephemeris) [1].
More advanced techniques relying on radio signal strengths, RTT time, and other observables [2] are being developed but I don't know of any in widespread use. I wouldn't be surprised to see something emerge soon though.
Google actually does collect wifi location data via Android devices. There's a setting that allows you to toggle this data on/off. If you turn it off, it actually disables the course location API available to Android apps (I recently encountered errors with both the Lux and the UCCW Android applications due to the fact that I had this setting disabled and those apps only had course-location built-in).
Now whether Android actually uses the wifi data to determine location, as opposed to simply collecting it and manually disabling course-location if you don't send them wifi data, I have no idea. It does seem to be related though to the new Geofencing API available in the latest versions of Android.
Skyhook absolutely relies on radio signal strengths and other observables and so do Google's location services.
This can be observed in practice as Android tablets and Apple devices with no GPS or cell radio at all can still locate themselves relatively well.
http://www.skyhookwireless.com/apps-enterprise/ has the marketing-bling diagram of Skyhook's use of multiple observables to determine location; even as of 4 or so years ago when I last used their API you sent them MAC + RSS and got back location.
Indoor positioning methods are being developed, outdoor methods are in use for years now. It's how positioning works on your laptop, e.g. in Google Maps.
Now whether Android actually uses the wifi data to determine location, as opposed to simply collecting it and manually disabling course-location if you don't send them wifi data, I have no idea. It does seem to be related though to the new Geofencing API available in the latest versions of Android.
EDIT: Sources!
http://www.zdnet.com/blog/networking/how-google-and-everyone...
http://developer.android.com/training/location/geofencing.ht...