It's very unlikely that GPS devices calculate distance by simply connecting the dots and summing up the distance of the line segments. More likely, they collect a time window of location points and then signal process that series of points to determine the most likely path the person actually followed. Part of that signal processing is to remove high frequency content that is in directions perpendicular to the main direction of travel. So if you are swinging your arm side to side as you run, they can see that in the signal, and they know they shouldn't include that movement when they calculate the distance traveled.