The Galileo project is an attempt to create a network of satellites that will be capable of calculating a location to within a few inches.
On Wednesday, the first Galileo satellite was blasted into orbit on the back of a rocket fired from Kazakhstan. This satellite, called Giove-A, was built by a British firm called Surrey Satellite Technology. The complete network will eventually consist of 30 satellites when it is completed in 2010, and will cost an estimated £2.2bn.
Galileo is a joint venture between the European Union and the European Space Agency. The UK is playing a major role, and has already contributed £92m to the project.
Galileo should support new services such as advanced satellite navigation and better mobile location information. Supporters of the project claim it will allow mobile users to easily find details of their nearest restaurant, cinema or hotel.
However, the project sparked serious disagreement between Europe and the US.
At present, the GPS system is operated by the US military, which has the power to limit access to the system or even turn it off. The EU hopes that Galileo will end Europe's dependence on GPS. America, though, has said it is concerned that Galileo could be used by terrorists.
Last year, the US and the EU reached an accord on adopting common operating standards for the two systems.