In the last few days Apple took lots of negative feedback concerning the location tracking affair. Today Apple released a Q&A statement, which admits to the tracking and calls it a 'bug'. An update to fix it is on the way though.
Apple is indeed collecting location information from all iPhone users via GSM base stations and Wi-Fi hotspots. Since Apple uses this information to assist and speed up the regular GPS location services for all users, it constantly polls that info from users and hence the reason the iPhones records this sort of information wherever you go.
Apple also admits the location recording continues to work even if you turn off Location Services and that the iPhone will have stored your location history ever since you bought your phone. According to the Q&A, both things are newly discovered bugs and will be 'fixed' with the next software update. It will disable backing up the location database to your computer, and your iPhone will log your location for only about a week back in time. You will be able to turn the feature off altogether by disabling Location Services.
Besides this location data, Apple also collects anonymous traffic data to provide “iPhone users an improved traffic service in the next couple of years”.
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