Pokémon Go's compass has two options, what does the second one do?

In Pokémon Go, there is a compass in the top right of the screen. You can click on it once and it will force the map and compass to face to the north.

You can also click on it a second time, making the compass and map face a different direction, however, I can't work out what it is pointing towards. Does anyone know?

Clicking the compass a second time should make the map face whatever direction your phone is pointing (give or take). While in this mode (being careful not to manually adjust the map by swiping), hold your phone up and slowly spin in a circle, it should track this, always pointing forward.

The accuracy of this may depend on the available hardware in your phone (accelerometers and such), as well as how straight you are holding your phone.