I’ve stayed away from discussion on the iPhone location data thing. Not only was I disinterested in the whole situation, I didn’t want to contribute to the overall hype of a problem that wasn’t really a problem.

From Apple’s Q&A:

Apple is not tracking the location of your iPhone. Apple has never done so and has no plans to ever do so.

Apple is collecting geo-tagged locations of nearby Wi-Fi hotspots and cell towers that is sent anonymously and in an encrypted form to Apple. This information is being collected so that iPhones can download a subset of the database to aid in location services.

Apple will be issuing a software update that will reduce the size of the database cached on iPhones, ceases backing up of this cache, and that will delete the cache when location services are turned off.

Also worthy of note:

Apple is now collecting anonymous traffic data to build a crowd-sourced traffic database with the goal of providing iPhone users an improved traffic service in the next couple of years.

Interesting.