MaxMind tests the accuracy of the GeoIP Databases on a
periodic basis. According to them, they are more accurate
for broadband IP addresses and less accurate for
mobile/cellular networks. Not being able to determine the
location of cellular networks is a general limitation of IP
geolocation services, due to the wide area cell phone
companies allocate IPs over.
They have compiled an accuracy chart available at
http://www.maxmind.com/app/city_accuracy
You also have the option to purchase their drop in database
which is more accurate then their free version.