I have no idea! I don’t think mine has one as my iPhone is too old, so they must have put some new thing in there to make it work… most likely it just has a small magnet somewhere which works like a normal compass (which follows the field lines of the Earth’s magnetic field). I’ve always found compasses pretty amazing as the Earths magnetic field isn’t very strong, but they can pick it up easily!
In the iPhone, the compass and orientation sensor are all the same thing. It’s a bit like a little ball-bearing in a round case. It is weighted so that gravity keeps it pointing downward and it has a small magnetic compass on it that always points north. In this way, the phone knows which way is up/down and which way is north – and that lets developers do all sorts of clever things with iPhone apps. Its also why some times the iPhone experiences magnetic interference, or the compass can go wildly wrong for a moment or two.
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