Do cellphones measure signal strength? [telecom]

When I see 3 bars (out of 4) on my cellphone (not necessarily during a call), does that mean:

1) The cellphone is measuring the strength of pings it occasionally receives from the nearest tower, and displaying that in bars?

2) Or, the cellphone sends occasional pings to the tower; the _tower_ measures the strength of those; and the _tower_ sends back an advisory to the phone telling it how many bars to display?

3) Or, something other than either of those?
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