The big guidance & navigational challenges for ARES arise from performing an aeromagnetic survey to investigate Mars' crazy crustal magnetism. This requires multiple, offset, parallel tracks at a constant altitude. There is an IMU on board, but since they always drift over time, there is also a sun sensor that tells the airplane what direction the sun is in. The Sun sensor isn't all that precise and errors still build up while it flies in a straight line for 100+ km, but the 180 degree turns at the end of each survey leg really help to tamp down the errors. Here is a full paper that provides an overview of everything:
The navigation is not quite as impressive as the Video Camera mounted on the Tail of the plane. They claim that they can read the writing on a candy wrapper sitting on the ground from a Mile up with it.
Condor, I found this explanation for how they will navigate the plane on Mars. The link takes you to a PDF file with some data on it.
pdf.aiaa.org/preview/CDReadyMUAV2003_834/PV2003_6608.pdf
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The Mars Airplane: A Credible Science Platform
pdf.aiaa.org/preview/CDReadyMUAV2003_834/PV2003_6608.pdf
Maybe they have mapped coordinates on previous missions to Mars and are giving it coordinates from those previous scouting missions. Just a thought.