Apple, Inc. (AAPL) released a lengthy press statement in the wake of the revelation that iOS devices (iPad, iPhone) were storing details about their users' locations thousands of times daily.  The release follows international investigations into Apple by the U.S. government and several other nations.

In the release Apple amazingly admits it was wrong.  It says that it did not intend for the phones to plots users' position when Location Services were disabled.  It writes:

7. When I turn off Location Services, why does my iPhone sometimes continue updating its Wi-Fi and cell tower data from Apple’s crowd-sourced database?

It shouldn’t. This is a bug, which we plan to fix shortly (see Software Update section below).

Apple claims its intentions were pure in implementing the database -- to improve signal capturing.  And while it says the database can pinpoint a user's location within a small radius, it's maintaining a database of Wi-Fi hotspots and cell towers at your current location.  

The company writes:

3. Why is my iPhone logging my location?

The iPhone is not logging your location. Rather, it’s maintaining a database of Wi-Fi hotspots and cell towers around your current location, some of which may be located more than one hundred miles away from your iPhone, to help your iPhone rapidly and accurately calculate its location when requested. Calculating a phone’s location using just GPS satellite data can take up to several minutes. iPhone can reduce this time to just a few seconds by using Wi-Fi hotspot and cell tower data to quickly find GPS satellites, and even triangulate its location using just Wi-Fi hotspot and cell tower data when GPS is not available (such as indoors or in basements). These calculations are performed live on the iPhone using a crowd-sourced database of Wi-Fi hotspot and cell tower data that is generated by tens of millions of iPhones sending the geo-tagged locations of nearby Wi-Fi hotspots and cell towers in an anonymous and encrypted form to Apple.

4. Is this crowd-sourced database stored on the iPhone?

The entire crowd-sourced database is too big to store on an iPhone, so we download an appropriate subset (cache) onto each iPhone. This cache is protected but not encrypted, and is backed up in iTunes whenever you back up your iPhone. The backup is encrypted or not, depending on the user settings in iTunes. The location data that researchers are seeing on the iPhone is not the past or present location of the iPhone, but rather the locations of Wi-Fi hotspots and cell towers surrounding the iPhone’s location, which can be more than one hundred miles away from the iPhone. We plan to cease backing up this cache in a software update coming soon (see Software Update section below).

In short, based on what Apple is telling the public, it was only trying to help customers, not track them.  The news follows a similar announcement by Apple's CEO, Steve Jobs, who recently wrote a customer telling them that Apple was not collecting the information its devices were storing.

However, it is baffling how Apple would not notice that the software switch to turn off Location Services wasn't working.  This bug represents a privacy risk and led to Apple inadvertently misinforming customers for almost a year.

Apple says it plans to issue an update "[s]ometime in the next few weeks", which will disable the copying of a backup of the database to your computer, will reduce the database's size, and will properly delete it when you turn off locations services. 

The company is facing a class action lawsuit on behalf of customers who want refunds and punitive damages after discovering about the violation of privacy.