How does the location system of dodgeball work?

Not sure exactly what you are asking - but at a very high level:

*Imagine a database of mostly user created "venues" that reside on a
server. This list of venues can be updated in various ways.

*When a registered user finds themselves in one of these venues, they
"checkin" to a "venue" by sending an email using their mobile device
(via SMS, for example) to dodgeball

*Imagine a buddy list like feature on the server, where a list of
friends of this user is also maintained. The friends are also
registered users of the system and their SMS/mobile email address is
known to the system. When the system receives an update from a user,
it sends a broadcast email to all the friends of that user in a
particular geography.

*The system does not rely on GPS or any other auto location detect technologies.

This is a high level abstraction of the concept. Some may quibble with
the semantics.