Today, 3 months later [of(of the loss],loss); it just notified me that my lost iPhone has been located and put in lost mode!
Even if you there isn't any Internet connection at your device's last location, Find My will use an innovative "Apple"Apple Network" comprised of countless Apple devices owned by other Apple users.
Does this mean that the thief has bypassed the passcode and put on Wi-Fi? Or did the thief restore the phone and it still had my ID Apple so it notified me?
Neither. It means Apple was able to reach the device and lock it down per your instructions/policy.
HereIt is here where you can further lock down your phone, wipe it, or supply the geolocation information to the authorities for recovery.
The good news here is Apple prescribes exactly what you should do in the event you lose access to your device. Hopefully with the device found, you can get it back unscathed.