Following yesterday's debate on a file discovered by two security researchers that keeps track of your entire location history in the form of cellular triangulation data stored unencrypted in the iPhone's backup, Daring Fireball's John Gruber weighed in to suggest this might be a simple bug or "an oversight" on Apple's part. He claims that a "little-birdie" told him the consolidated.db file acts as a cache for your location, and it's not meant in any way to be used by Apple to track your location history and moves; the file is never sent to Apple's servers, but is kept locally on your 3G device and on your computer -- if you decided to back up an iPhone or iPad using iTunes. Moreover, the location data doesn't rely on accurate GPS information -- instead, it uses antennas' triangulation, meaning that in most cases data can be miles off your actual location on a specific day.
The big question of course, is why Apple is storing this information. I don’t have a definitive answer, but my little-birdie-informed understanding is that consolidated.db acts as a cache for location data, and that historical data should be getting culled but isn’t, either due to a bug or, more likely, an oversight. I.e. someone wrote the code to cache location data but never wrote code to cull non-recent entries from the cache, so that a database that’s meant to serve as a cache of your recent location data is instead a persistent log of your location history. I’d wager this gets fixed in the next iOS update.
iOS 4.3.2 was released last week, and Apple might push a 4.3.3 software update relatively soon to "improve overall stability" and introduce "bug fixes" -- as they usually write in their changelogs for this kind of updates. Apple PR hasn't issued a statement about the discovery of this location tracking system for iPhones and iPads 3G, but the story has quickly made the rounds of the Internet and ended up on mainstream media as well. If it's really a bug, or an oversight, a software update should be the easiest solution to the problem.