Location Context

A location context specifies a circular geographical area in which it is active. It is formed by a centre point (latitude, longitude) plus a radius around that point.

Location Providers

A location provider is a method of supplying geographical coordinates. Tasker must use one or more location providers to be able to decide when a location context should become active or inactive.
GPS

The most accurate provider available (around +-10m), but its performance degrades quickly indoors and it uses a relatively large amount of power.

To set the frequency of GPS fixes, see Menu->Preferences->Monitor. GPS Check Time determines the check frequency in seconds while the device is awake, Off Check Time while the device is asleep.

GPS will only be used for a particular context if it is specified in the location edit screen. It will never be used if no context needs it.

Network
This (according to the Android documentation) uses a combination of cell-towers and WiFi information to determine the device's geographical location. It is less power-hungry than GPS, but also less accurate (sometimes +- several kilometres) and requires data network availability.

Network will only be used for a particular context if it is specified in the location edit screen. It will never be used if no context needs it.

Bouncing

Bouncing is a phenomenon where, for various reasons, location contexts quickly (and annoyingly) toggle between active and inactive. Tasker uses two methods to reduce amount of bouncing which occurs.
Fix Accuracy

Location fixes are ignored if their accuracy value is greater (meaning: less accurate) than the context's radius. That means that specifying a radius of e.g. 100m will exclude all fixes with an accuracy of greater than += 100m.

This is mainly intended to reduce bouncing caused by degradation in the GPS signal in areas without a good view of the sky.

You can see the accuracy of the fixes you are getting using the variable %LOA, e.g. in an Alert/Flash action text perhaps triggered by a widget.

Stickiness
Tasker accepts fixes that are less likely to be truly within the radius once a location context is active. This makes it 'sticky on', and is intended to reduce bouncing in locations around the edges of the radius.