It is a simple geometry problem, not a PyQGIS problem.
If the unit of the projection system is meter, according to the Euclidean distance formula, the distance between two points in the plane is given by:
return math.sqrt((point2.x()-point1.x())**2 + (point2.y()-point1.y())**2)
pt1 = QgsPoint(50,50)
pt2 = QgsPoint(150,150)
sqrDist, the square distance between the two points:
So the result is the Euclidean Distance and, if the unit is not meter, you cannot use
You need to use other distances as the Haversine formula (look at QGIS - How to calculate distances in a point sequence?)
The solution of Nathan W is to change the projection with PyQGIS2.