Apple Q&A on gathering and use of location data (Apple Press Release)
The iPhone is not logging your location. Rather, it’s maintaining a database of Wi-Fi hotspots and cell towers around your current location, some of which may be located more than one hundred miles away from your iPhone, to help your iPhone rapidly and accurately calculate its location when requestedCan Apple locate me based on my geo-tagged Wi-Fi hotspot and cell tower data? 
No. This data is sent to Apple in an anonymous and encrypted form. Apple cannot identify the source of this data.I think a lot of folks who spent money on Apple products are going to be happy with this, and for that I'm glad.But I didn't find this release adequate. Apple is not tracking me -- they are keeping a time-stamped list of nearby access points on my device, which effectively is a huge breadcrumb trail of everywhere I've been and when. Apple doesn't know it's me -- because the data is encrypted, which makes no sense at all. Whether data is encrypted or not is meaningless. Can I go to the Apple server logs and track incoming downloads and associate them with the data or not? I strongly suspect the answer is "yes". If not, that's great, but that wasn't described here.The killer omission? That Apple has been doing all of this -- which is at the very least controversial -- without informing the users in a manner in which they clearly understood it. The response we see is simply a reaction. The "bug" here is getting caught.I don't necessarily see anything nefarious at work, but I'm troubled with the idea that Apple was keeping a list of my whereabouts (the nearest access point, for those of you who are literally-minded) without my knowing it. That's a pretty serious breach of user trust, no matter how many times it was covered in the 47-page lawyered-up doc that nobody reads.But like I said, folks are willing to cut Apple lots of slack, and they deserve it. But hell if I'd want to see something like this happen again, from any manufacturer. I'm not so sure that vendors are getting the point.