Researchers Alasdair Allan and Pete Warden have found that the iPhone records cell tower access, and hence your location, in an easy-to-read file that is transferred as you switch devices. And they do this whether you like it or not.
The more fundamental problem is that Apple are collecting this information at all. Cell-phone providers collect similar data almost inevitably as part of their operations, but it’s kept behind their firewall. It normally requires a court order to gain access to it, whereas this is available to anyone who can get their hands on your phone or computer.
Allan and Warden provide an open-source application, iPhone Tracker, that maps that data. The good news is that the data doesn't seem go to be anywhere other than your own backups and devices. Privacy concerns aside, this kind of makes me wish I had an iPhone; although I suspect my map would be painfully boring.
[iPhone Tracker via Marco]