it's all about the information
Here is my two cents on Apple Gate, (the iPhone tracking issue), and why I believe its a red herring. It’s not a threat to your privacy based on the other research I have found.
First off, privacy has been a hot topic for the last year. Everyone is learning the lessons they faced with Facebook and are rightfully concerned. Also, reports of other companies, most recently Sony getting hacked, losing customer data is also getting more attention. So its understandable everyone is a little edgy when it comes to privacy.
Second, this is the opportune time for fans of BlackBerry and Android to take swipes at Apple. Unbeknownst to many people though, Android, BlackBerry and Microsoft all collect location information much like Apple did.
It’s likely this is the result of bad design or a bug, I’m guessing in the next version of iOS the location data might be encrypted and further buried again (security through obscurity). This information has actually been available before the blog post by Pete Warden last week.
I’m guessing the fact they store the entire history of your location is a bug. The fact that after disabling ‘Location Services’, your location continues to be logged sounds like a bug – and nothing more.
Let’s not forget that Apple is still trying to make an entry into social networking and using location based services would be an ideal way to jump in. The market for location based services is still relatively new, Foursquare is definitely leading the pack in that area, however there is still no clear market leader. I’m guessing Apple wants to dominate here.
Apple has testified previously to US Congress about collecting location data and they’ve indicated the data is anonymized. We’ll just have to wait and see when Apple responds.
Update, April 27, 2011: Apple has just confirmed it’s a bug, among many other details released in this Q&A