How is it possible that Google Fit app measures number of steps all the time without draining battery?

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.

On some very recent phones like the Nexus 5 (released in late 2013 with Android 4.4 KitKat), there is a dedicated low-power CPU core that can serve as a pedometer. Since this core consumes very little power and can compute steps by itself without the need for the entire CPU or the GPS, overall battery use is reduced greatly. On the recent iPhones, there is a similar microcontroller called the M7 coprocessor in the iPhone 5s and the M8 in the iPhone 6.

More information here:

https://developer.android.com/about/versions/kitkat.html

http://nexus5.wonderhowto.com/how-to/your-nexus-5-has-real-pedometer-built-in-heres-you-use-0151267/

http://www.androidbeat.com/2014/01/pedometer-nexus5-hardware-count-steps-walked/

having a 3 year old HTC OneX I can say that THERE IS NO DEDICATED HARDWARE, Google Fit just uses standard sensors in a very clever way. I come from Runtastic Pedometer: there is a clear battery consume when in use, it would be impossible to keep it on all the time as it needs the full accelerometer power. On the other side, if you stand still and shake the phone Runtastic will conut the shakes, while Google fit apparently does nothing.. still it works perfectly when you actually walk or run. Magic.