Do animals really use magnetism in any interesting way to navigate?

We think so, but the subject is still under investigation.

Certain types of bacteria called magnetotactic bacteria have internal bodies composed of lodestone (magnetite). There is no chemically sensible reason why bacteria would have favored this compound of iron over all others unless the magnetic properties of this element were important, or useful, in some way. Biologists think that bacteria may use these internal compasses to sense where 'down' is so that they can find food.

Here is an excerpt from my book 'The 23rd Cycle' that gives a more detailed overview:

Back in 1974, R. Blakemore at the University of New Hampshire uncovered a remarkable trick that certain species of fresh water bacteria seemed to share. As they grow to maturity, each of them creates within their single-celled bodies nearly two-dozen pure cubical crystals of magnetite. Like pearls on a string, the crystals are oriented along the long axis of the bacterium. By some evolutionary process we can't imagine, primitive organisms somehow grew a single crystal of magnetite, perhaps as an annoying byproduct of eating. As these crystal 'excements' accumulated, the host became more efficient in finding its way to new locations rather than spinning around and around in the dark. Whatever the process, lowly bacteria managed to beat humans to the discovery of the magnetic compass by, oh, about 3 billion years! (ref = Sci Am, 245, p. 58 1981)

Using magnetite as a clue, scientists have thrown many different organisms under the microscope, and many organisms have now been found to have at least some kind of magnetite embedded in them including homing pigeons, tuna, honey bees, dolphins, whales and green turtles. Searching for such a magnetite compass among the billions of cells of an organism is far worse that searching for a magnetic needle in an organic haystack.

The story has become legendary about how homing-pigeon rallys are note held during times when geomagnetic conditions are unstable.

But how, exactly, does an organism 'sense' which direction magnetite crystals are pointing inside them? How do You know which way ....The most telling juxtapositions seem to be found in mammals. In 1982 Maugh wrote an article for Science "Magnetic Navigation, an Attractive Possibility' (Science 215, 1492.) detailing how microscopic examination of the magnetite crystals turned up some kinds of nervous tissue. Three years later, a complete book was written on "Magnetite Biomineralization and Magnetoreception in Organisms (Plennum Press, NY, 1985) by Kirchvink, Jones and Mac Fadden.

How about humans? Are we being left out of the Magnetite Club just because of some evolutionary misshap? It doesn't seem so. In 1983 Baker, Mather and Kennaugh of the University of Manchester discovered "Magnetic bones in human sinuses". You can read their Science journal article for more details (301, p. 78).

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