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@Velocio
It is opt-in, they ask you in plain English the first time you used a recent version of Google Maps whether you would like the information recorded.
It is private by default, and only you and Google can see it. Google uses the information to improve the utility and function of Google Now.
Though you can opt to also add friends and family to Latitude so that your current position (to some degree of vagueness that you determine) is shared with them.
I actually like Latitude. For the simple things of meeting my girl in town and not needing to call her every 5 minutes... I just check the map and head to where she is. And for the occasional rides with forumengers to see where they are when we're waiting for them to turn up (or if I'm joining a ride late it's easier to see where the group is).
I barely check it, but when I do it's nice to have.
Location History is mostly to help you improve Google Now. It will occasionally guess wrong where you've been, and what you've been up to. You can correct it using Location History by telling it where you actually were.
Bear in mind... telcos have always known all of this, and the police could always get access to it. All that Google have done is to give you access to your own data so that it is of utility and value to you. Turning it off in no way reduces the ability for third parties to get the information out of the telcos.