Players have confirmed that anyone using a GPS spoofing app will result in a soft ban. This means you can walk around but not be able to catch any Pokémon or use Pokéstops.
GPS spoofing is a means of tricking your current location without moving. So a player in Australia could virtually capture Pokémon and invade Gyms in New York. This was also used a workaround for PC players to play Pokémon GO using an Android emulator such as Bluestacks.
The soft ban is set to last around an hour so it isn’t anything harsh. Though I’d imagine abusing it will result in harsher consequences.