Because an observer on the ground sees the satellites in motion relative to them, Special Relativity predicts that we should see their clocks ticking more slowly (see the Special Relativity lecture). Special Relativity predicts that the on-board atomic clocks on the satellites should fall behind clocks on the ground by about 7 microseconds per day because of the slower ticking rate due to the time dilation effect of their relative motion.

Further, the satellites are in orbits high above the Earth, where the curvature of spacetime due to the Earth's mass is less than it is at the Earth's surface. A prediction of General Relativity is that clocks closer to a massive object will seem to tick more slowly than those located further away (see the Black Holes lecture). As such, when viewed from the surface of the Earth, the clocks on the satellites appear to be ticking faster than identical clocks on the ground. A calculation using General Relativity predicts that the clocks in each GPS satellite should get ahead of ground-based clocks by 45 microseconds per day.

The combination of these two relativitic effects means that the clocks on-board each satellite should tick faster than identical clocks on the ground by about 38 microseconds per day (45-7=38)! This sounds small, but the high-precision required of the GPS system requires nanosecond accuracy, and 38 microseconds is 38,000 nanoseconds. If these effects were not properly taken into account, a navigational fix based on the GPS constellation would be false after only 2 minutes, and errors in global positions would continue to accumulate at a rate of about 10 kilometers each day! The whole system would be utterly worthless for navigation in a very short time. This kind of accumulated error is akin to measuring my location while standing on my front porch in Columbus, Ohio one day, and then making the same measurement a week later and having my GPS receiver tell me that my porch and I are currently about 5000 meters in the air somewhere over Detroit.

The engineers who designed the GPS system included these relativistic effects when they designed and deployed the system. For example, to counteract the General Relativistic effect once on orbit, they slowed down the ticking frequency of the atomic clocks before they were launched so that once they were in their proper orbit stations their clocks would appear to tick at the correct rate as compared to the reference atomic clocks at the GPS ground stations. Further, each GPS receiver has built into it a microcomputer that (among other things) performs the necessary relativistic calculations when determining the user's location.

From:
http://www.astronomy.ohio-state.edu/~pogge/Ast162/Unit5/gps.html