We reported a few weeks ago about the whole "location tracking" issue, which was started by the iPhone, proceeded by concerns on Android and finally Windows Phone, which was mostly exonerated from the controversy.
Regardless of the lack of tracking, Microsoft is looking to be more transparent on the matter than some other companies and in turn has directly responded to the U.S. government's 'House Energy and Commerce Committee' request for explanation on their practices when collecting data on user's whereabouts. From the lengthy and thorough document:
The collection and use of location data by smart phones can serve a variety of purposes.It therefore is worth clarifying at the outset that the term “location data” can refer to two related but conceptually distinct categories of data: (1) data that is used to determine the approximate location of a device for use by an application; and (2) data that identifies specifically where a device is or has been. The Windows Phone 7 operating system is designed to focus squarely on the first category, and we have taken steps to avoid collecting the type of data described in the second category, which can facilitate user tracking.
...This database snippet contains information about nearby WiFi access points and cell towers in the area (on average a 5-6 square kilometer area) where the user made the request. It does not show where a user is or has been within that area.
...Similar to other operating systems, when Microsoft first designed and implemented location services for Windows Phone 7, it programmed its system to collect device identifiers and store them for a limited time. While collecting device identifiers can help assemble and refine a database of available WiFi access points and cell towers more quickly and effectively than without them, these identifiers have diminishing value over time. Given the declining utility of device identifiers, Microsoft recently discontinued its storage and use of device identifiers. Further, as part of its next scheduled update to existing Windows Phone 7 devices,updated devices will no longer send device identifiers to the location service and new phones arriving this fall will not send device identifiers to the location service. [Emphasis, ours]
Anyways, it's all actually very interesting stuff if you want to know how the Windows Phone location based system (aka 'Orion') works. And it's always nice to see Microsoft being so open about its practices. Find anything we missed, holla in comments.
Source: U.S. House Energy and Commerce Committee (PDF); via WinRumors