I need to work on an app where accurate location updates are needed to run on the background.
I can see this paragraph from the iOS App Programming Guide:
An app that provides continuous location updates to the user (even when in the background) can enable background location services by including the UIBackgroundModes key (with the location value) in its Info.plist file. The inclusion of this value in the UIBackgroundModes key does not preclude the system from suspending the app, but it does tell the system that it should wake up the app whenever there is new location data to deliver. Thus, this key effectively lets the app run in the background to process location updates whenever they occur
However, I do not quite understand what happens in the background. Does the app keep the same accuricy measurement determined in the foreground location services? if so, how long does it keep up running in the background?
It does keep running in the back ground, till it is suspended by the iOS because of lack of resources. As long as it is in the back ground. A simple example would be for you to NSLog the location and then connect the iPhone later to your XCode and look at teh console. Not sure how long of an operation you can perform though, but I am pretty sure you can do some basic core data insertion.
Take a look at this cool tutorial http://mobile.tutsplus.com/tutorials/iphone/ios-multitasking-background-location/
Which gives you a project which you can play around with.