The things you find poking around in someone else's code…
The above screen was unearthed by a creative hacker crawling through the bowels of iPhoto '09, and strongly suggests the iPhone can — and may be — using some kind of hitherto unknown "Location" function to associate GPS log data with the photos it takes.
At its most benign, this could be used for pulling geotagging information off photos taken with another camera, or viewing a map of your travels pinned with the locales where you grabbed a snapshot or three.
Right now, this is just all blue-skying: if this "Location" app exists, it'd have to be running as a full-time background app (most current GPS apps are foreground-only), and the battery drain alone stands to be horrendous. If Apple in fact plans to role this out as an advertised feature, the privacy issues by themselves would have to be scrupulously ironed out ahead of time.
[Via TidBITS]
Accessories & Apps: Beta Testers Wanted
iOS Firmware/IPSW Download Guide
Legacy iTunes Download Archive
App Store Top Charts
iPhone and Android Resale Value Charts
USA iPhone Carrier Plans Compared
Complete iPhone Jailbreaking Guide 
Complete iPhone Specification Matrix 
The iPhone already does this. Open a photo taken with the iPhone with Apple’s Preview application, open the Inspector (under the tools menu), and in the popup window select the ballon header with the exclamation mark (the center one). It’ll show you the Lat/Long & Time stamp along with a map of the world showing where the photo was taken. Click on “Locate” at the bottom and it’ll open a Google Maps window in Safari showing the location in detail. This was all detailed in David Pogue’s book on the iPhone.
Matt
@Matt – this was talking about geotagging photos NOT taken with the iPhone. Basically, using the iPhone as a GPS logger and then geotagging photos taken with another camera automatically within iPhoto.