So, I recently started an alt account to have a bit of a playaround with this after noticing people playing suspiciously on twitch. Turns out with a good android emulator and a GPS spoofer, you can play from the comfort of your own home and teleport to anywhere in the world - with the worst punishment from Niantec being a 1/2 hour soft-ban if they catch you. They didn't catch me in the 4-5 hours I was playing with it.
Honestly, if you are running around in this game hatching eggs by foot, or even finding pokemon by foot, you are being suckered and have no chance against the cheaters. I hit level 17 in a single night on my alt account. The gross part was that I barely cheated - I just hung around at Circular Quay and the Opera House. Technically you could have done everything I did by foot, aside from a Dragonair I teleported to Hyde Park for. I probably "walked" about 6km in total, I managed to hatch a 5km egg. The software I was using is already good enough to simulate walking with your GPS by using WASD to walk around. It was pretty seemless and easy.
Not sure if Niantec can or will do anything about it. I don't believe they can detect the GPS spoof if the android distribution is custom and has been built to avoid it. They could implement some complicated algorithms on the server side to detect if you've moved a "possible" distance in any given amount of time - and ban you... but it would add a massive amount of overhead for them in removing accidental bans, etc. Given the scale of the software, I doubt this will happen. All in all, I daresay the cheating is here to stay. Personally, I'm not sure how much "foot time" I can be bothered sinking into the game anymore, knowing that there's a small but growing legion of GPS spoofers out there.
Having said that, if you're still keen on the game after this knowledge and live in Sydney, I can promise you that walking between Circular Quay and the Opera House will net you a disgusting number of pokemon. You pretty much can't catch them quick enough. There must be quite a horde of motherf**kers down there every night... so many lures... and they were still pumping after I went to bed.