It would appear that a newly discovered un-encrypted file located on iOS 4 devices has been storing location information since it launched back on June 21, 2010. What’s not entirely clear is exactly how Apple is using this information, if at all. The file is called consolidated.db and it works by downloading latitude and longitude information taken from triangulated cell phone towers as you move about various locations.

As you would imagine, the iPhone and the iPad are the only iOS 4 devices that this could possibly affect, however there are no indications that any of this information is being sent to Apple. Some believe it’s just an easier way for iPhoto to correctly tag information to pictures taken on the devices while others think it may have to do with the new free MobileMe feature called Find My iPhone that allows you to find the location of a lost phone with the added benefit of being able to send a direct system message to the device and/or wipe its contents remotely.

Of course, this new information is likely to only upset a small handful of users seriously concerned with data privacy issues and anyone developing any new concerns should be reminded that the information collected in this file is the same that any phone company can obtain from their own data-collection processes. With cell phones, it’s possible for any law enforcement agency to find out your previous GPS history—with a court order of course.

As far as protecting you and your device from unwanted eyes, the best thing you can do besides turning your device off is to simply encrypt your iTunes backups.

Finally, for anyone wishing to complain to Apple (or anyone else), understand that all of this information was divulged to us in a long EULA that we all generally fail to read on just about everything with buy! Here’s a direct quote from Apple’s terms:

Apple and our partners and licensees may collect, use, and share precise location data, including the real-time geographic location of your Apple computer or device. This location data is collected anonymously in a form that does not personally identify you and is used by Apple and our partners and licensees to provide and improve location-based products and services.

I, for one am not worried about anything—for two reasons—1. I’m doing nothing wrong and 2. There are plenty of apps out there that use location tracking as their primary function.

So, to answer the stated question directly, no, Apple is not watching you! But at least it’s nice to understand how your device works a little bit more, right?