Apple has clarified that it does not store location data on handsets, and that it does, and that it's going to stop soon... only it isn't... and it's nothing to worry about anyway.
Apple takes full responsibility for the fuss: the company apparently failed to educate us properly about what it was doing.
Apple's statement then goes on to explain that the data stored on an iPhone relates to nearby base stations and Wi-Fi hotspots, but not necessarily ones to which the handset has ever connected; rather places the handset might be expected to go in the future.
When not using GPS, a handset relies on the identity of the nearest cell or Wi-Fi hotspot. Neither transmitter will reveal its location but various companies hold databases linking cell ID with location. Those databases were built up by driving along every road in the country, or bought from the mobile network operators. When a device gets a decent GPS fix it can submit the local Wi-Fi and cell data, keeping the database up to date and correcting any errors.
An Android device which wants to know where it is will send the local transmitter (Wi-Fi and cellular) identities to Google, which consults the database and, if there's a match, responds with a rough location. That location might be good enough, or can be used to get a faster GPS fix.
But Apple thought it could improve on that model, by downloading part of the database to the iPhone in preparation for such a request. So the much discussed data on the iPhone is a list of cells and Wi-Fi identities that Apple thinks you might visit, not places you've visited before.
So your location will probably be there, but so will other locations you've not yet visited. Regarding the quantity of data, and the fact that it keeps accumulating even when Location Services are switched off, these are apparently bugs which will be fixed real soon now.
It's hard not to see this new statement from Cupertino as a direct response to the House Energy and Commerce Committee's letter asking for details of tracking undertaken by all the mobile phone platforms, though the publicity surrounding the issue has obviously played its part.
Not that Cupertino isn't keeping track of where you are - it just isn't storing that data. Apple happily admits that its iAd platform uses your location to deliver targeted advertisements, and Apple is stockpiling anonymous data on movements for a future traffic-information project. But other than that the company promises you're not being tracked - at least not by Apple. ®
* There is an old, and well trusted, IT adage that one should never, ever, underestimate the stupidity of the user.