The Google Fit app, when installed, measures the duration you are walking or running, and also the number of steps all the time. However, strangely, using it does not seem to drain the battery. Other apps like Moves which seems to record number of steps pretty accurately declares that it uses a lot of power because of it constantly monitoring the GPS and the accelerometer.
I imagine several possibilities:
The app still feels magical. Counting steps the whole time without perceptible battery drain.
Thanks for asking this question!
Battery is one of our top most concerns and we work hard to optimize Google Fit's battery usage and provide a magical experience. Google Fit uses a mix of sensors(Accelerometer, Step counter, Significant Motion counter), Machine Learning and heuristics to get the data right. Our algorithm is pretty similar to your 1st option plus a little bit of magic.
We periodically poll accelerometer and use Machine Learning and heuristics to correctly identify the activity and duration. For devices with hardware step counters, we use these step counters to monitor step counts. For older devices, we use the activity detected to predict the right number of steps. Our algorithms merge these activities, steps and sometimes location to correlate and further increase accuracy.
We do not poll GPS to estimate steps or detect activities.
-- Engineer on Google Fit Team.