Technically speaking, it uses distance to calculate mileage. The so-called vehicle speed sensor in a vehicle really generates "X" pulses per mile, regardless of the vehicles speed. The mpguino simply counts pulses for distance, and computes pulses/time to display mph.
All we are doing here is go from a 12 volt vss signal to a 5 volt signal though.
You can of course adjust the speed/distance and the fuel, and a few other tweaks, with the menus. Here is the calibration procedure:
Mpguino calibration - EcoModder