GPS is great, but it isn't always reliable. The signal can be interrupted by, say, a tunnel, or something else smothering the relay between here and space. So DARPA wants to navigate GPS blackout areas with a chip that does everything you need when GPS stops working, and to make that tech smaller than a penny.
The chip is called a timing and inertial measurement unit (TIMU), and it's actually a pretty simple little tool. Stuffed inside the 10 cubic millimeters are three gyroscopes, three accelerometers, and a master clock, all engineered by DARPA to take up as little space as possible. Those devices can measure orientation, acceleration, and time, which, if you already have a starting point, is all that's needed to calculate where something is. The chip's possible because of a unique structure: six layers of silica, each about as thick as a hair, stacked together.
DAPRA is developing the technology to help U.S. troops avoid navigational mishaps on military missions. It is meant to kick into gear when GPS is temporarily down or unavailable--it is not designed to replace GPS. So don't expect it to condescendingly recite driving directions to you any time soon.