Either way, the upshot is the same: all iPhones running iOS 4.0 or higher periodically record the time and general location of the device using cell towers as a point of reference. As far as anyone can tell, this info is only stored on the phone (and in the phone’s backup on your Mac or PC) and is never transmitted to anyone, including Apple.
Wireless carriers track and record users location as a matter of course. Periodically your phone looks for new towers; when it finds one, it announces its presence so the cellular network knows where to route incoming calls or data requests. This happens constantly when the phone is on--if it didn’t, your cell phone simply wouldn’t work. However, there’s a good reason that people are upset about the iPhone automatically tracking your movements. Because Apple is storing the tracking info in unencrypted files on your phone and computer, they’re very easily accessed. While your angry ex-wife (or her private investigator) would need a court order to subpoena your phone records from AT&T, she just needs five minutes with your MacBook and a copy of iPhone Tracker.
The first thing you need to do is encrypt the backups of your iOS devices on the computer you sync them with. Open iTunes, connect your iPhone or iPad to the computer, and click on the device when it pops up. Go to the Summary tab and make sure “Encrypt iPad Backup” is checked. Obviously, your encrypted backup will only be as secure as the password you choose, so follow a good password scheme. If you want to go a step further or are worried that Apple may not be encrypting your backup with strong enough encryption, you can use a third-party utility like TrueCrypt to encrypt the backup folder (it’s in /Users/
Once you’ve secured your phone and your computer, the only other thing to do is wait for Apple to patch iOS and either disable this functionality or give users the option to choose whether they want it on or not. While it probably isn’t illegal for Apple to store this information on the phone, they shouldn’t do it without the user’s consent, and they sure as hell shouldn’t do it in an unencrypted file that's easy for anyone with access to your computer to exploit.
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