Where it gets more interesting is when Apple explains what it actually collects, and who they share it with -- namely, Google and Skyhook, who provided location services to earlier versions of the operating system. In iOS 3.2 and beyond, only Apple has the keys to the database, and what's inside are locations of cell towers, WiFi access points, and anonymous GPS coordinates. None of these are personally identifying, as the company doesn't collect SSIDs or any data, and in the case of device coordinates they're reportedly collected and sent in encrypted batches only once every 12 hours, using a random ID generated by the phone every 24 hours that apparently can't be linked back to the device. In the case of iAd, Apple says coordinates don't even make it to a database, as they're immediately converted (by remote server) to a advertising-friendly five-digit zip code. Concerning location data collection for services other than iAd, there's still the little question of why, but we'll just leave you with Apple legal's quote on that subject after the break, and let you hit up the full document yourself at Scribd if you want the deep dive.
"To provide the high quality products and services that its customers demand, Apple must have access to comprehensive location-based information... these databases must be updated continuously to account for, among other things, the ever-changing physical landscape, more innovative uses of mobile technology, and the increasing number of Apple's customers."