Looks like Apple is tracking iOS devices an recording that info in clear text:
http://radar.oreilly.com/2011/04/apple-location-tracking.html
Here's a way to ensure this data is not recorded:
You must have a hacked iOS device, and either Mobile Terminal or an SSH login. You must also know the root password. You first remove/move this file, and recreate it as a symbolic link to /dev/null like:
su
cd /System/Library/Frameworks/CoreLocation.framework/Support
rm consolidated.db
ln -s /dev/null consolidated.db
Anything written to this 'file' is sent to /dev/null, so it is not saved on the file system. I've done this on a hacked device, and Location Services continue to work.