If I use Find My IPhone to check on the location of someone in my friend list, can they telll? If I the Find My iPhone app to check on the location of someone in my friend list in the app, are they notified in any way that their location is being revealed to me?
There is no immediate indication on the device that it is currently being tracked, only that GPS is in use by something.

Invoking the GPS will cause the location services arrow to appear in the top bar. The catch is that going into the settings, General -> Privacy, the user can tell what. If FMI is being used currently, the arrow in its box will be purple, and if it was used in the last 24 hours, the arrow in its box will be grey.

However, the user can disable the Find My Iphone feature with a simple toggle in the same menu.