In a posting on its news page for iPhone developers earlier this week, Apple encouraged developers to integrate the Core Location framework into their apps, offering the ability to deliver information to users based on their location. Perhaps more importantly, Apple also clarified that the use of such geolocation solely for serving ads to users is not permitted.
If you build your application with features based on a user's location, make sure these features provide beneficial information. If your app uses location-based information primarily to enable mobile advertisers to deliver targeted ads based on a user's location, your app will be returned to you by the App Store Review Team for modification before it can be posted to the App Store.
Apple's exact motives for the restriction remain unclear, although some have speculated that Apple may be seeking to give Quattro Wireless, its own mobile advertising unit, a leg up on competitors such as AdMob. The restriction does not, however, prohibit all location-based advertising, instead requiring useful content to also be served using the technology. Users are typically required to confirm that they wish to allow an application to access their location, and thus it seems possible that Apple merely wishes to restrict such required user input to applications that are actually providing useful location-based information to users.