Google may have made finding out a little easier with an update to its Google Maps for Android: the update replaces the previous direction arrow on the blue dot that represents your position with a shining blue beam. "Think of it as a flashlight guiding your travels," said Google comfortingly.
The beam, as well as showing direction, also shows how accurate the phone's direction data is at any given time: the narrower the beam, the more accurate the direction.
If the beam is wider, it suggests that the phone compass is uncalibrated and the sensors aren't working as they should. That might be because the phone is being charged or the phone is close to a large metal object like a pole -- something that's pretty hard to avoid while walking through a city.
To re-calibrate the compass sensors, Google recommends moving the phone in a figure-of-eight motion a few times. "This should immediately result in a more accurate direction," said Google Maps product manager Raja Ayyagari.