Location service is already there in iOS since the first. Cell-ID and Wi-Fi hotspot does allow for tracking user location. Apple's old device using Google and Skyhook database also do the same but since the iOS 3.2 Apple started making its own database by collecting statistics from the user, including location data.
The problem now is that the collected data is stored on your iPhone in unencrypted form. This means that the data contains all user movement during the period of one year. File and copy it to go too into computers when users synchronize or backup phone.
If the condition jailbroken iPhone or coincidence stolen then everyone who can access the file (called consolidated.db) will easily do to find out where the log extract user only traveling for a year back.
Log activities is known to exist in all the iPhone and iPad 3G model since last year. The logs can be removed using an application Untrackerd. This application also will prevent iOS to re-store the location history on the iPhone / iPad. But it should be noted Untrackerd can only be installed on a jailbroken iPhone / iPad via Cydia repository software.