Why does Apple do all of this? The company claims that it's all necessary to account for "the ever-changing physical landscape, more innovative uses of mobile technology, and the increasing number of Apple's customers." Of course, if you don't want to be a part of this system, you can shut all of the location tracking down right inside the phone's preferences -- either phone-wide, or on a per-app basis depending on what version of iOS you are using. Version 3 and below requires a visit to each app, iOS 4 allows you to shut it off at the OS level. Just go to Settings>General>Location Services and turn location data on or off. The problem then, of course, is that you won't have access to those services while you use your phone.
Apple also notes that it collects the same data from Macs who use location-based services (like automatically setting your time zone), and the iAd network also sends location information every time an ad is requested. In short, Apple knows where you are, and in return, you get the benefit of location-specific information. Worth it?