This response was given by one of our GPS Engineering Specialists in answer to the following question:
>Question:
Some people suggest that the GPS signal does not have a carrier.  Can you describe for us how the GPS carrier operates and give us some insight into how carrier phase measurements are made in a GPS receiver?

>Answer follows:
Yes,  the GPS signal has a carrier. It is a spread spectrum carrier,  but it provides the features of a carrier and can be used to make carrier phase measurements for additional GPS accuracy or other purposes.  The easiest version to understand the concept is probably the frequency hopping scheme. Oversimplified, what happens is that the carrier and the signal information it carries "hops"  from one frequency to another in some pre scheduled pattern.  If your receiver hops from one frequency to another in the same pattern, the information comes out of the signal clearly. If you are off the pattern, it sounds like noise. The hop rate is very fast, but the idea would be that you transmit on channel 1 for 2 seconds, then channel 5 for 1 second, then channel 3 for 4 seconds, and so on. Anyone switching channels at the wrong rate or in the wrong order will get garbled information.

The switching rate is what is called the chip rate,  and actually in the MHz range. In direct sequence SS, the frequency change of the carrier is continuous rather than discrete steps. That is, instead of jumping from channel 1 to channel 5, you do a continuous change (like turning the dial on the old analog, non crystal transmitters). If you will recall phase modulation, which looks a lot like frequency modulation, you will remember that the signal modulating the carrier does so by shifting the phase. Direct sequence basically does this, but the first stage of  signal is the PRN code. The information (nav message) is multiplexed onto this. I'm sure you are very familiar with how commercial FM with its stereo and SCA (and pager and stock market data) signals are multiplexed onto the carrier and subcarriers. It is much the same thing with direct sequence, except the first step from the main carrier is the PRN code. The result is that the signal sounds like noise. Once you synchronize, then the nav message comes through in the clear.  To give a simplified idea how the demodulation works, think about how SSB works. You generate a local signal with your local oscillator, which beats against the incoming signal. In regular AM, SSB, FM, CW, this LO frequency is fixed. Now for spread spectrum, have your LO vary its frequency according to the pseudorandom noise code. You can't really do this fast enough with an analog LO, so use a digital signal processing chip instead (DSP). In fact you can sample the signal fast enough that you can do all of the different code patterns with various time delays until you match. In a single channel GPS receiver, you pick one PRN code and try various time delays and doppler shifts until you match or give up and pick the next one. Once matched, you can keep synch on all the SVs.

End of answer on GPS Carrier Demodulation discussion.