Local search is one market that really goes well for mobile. Actually it's the most significant application on a mobile device. So, when Google released their Geolocation API last month they're one of the first ones to use it and they've come up with a mobile web app that greatly improves local search.
My Location approximates your actual location using the same Cell ID technology used by Google maps for mobile. So Even without GPS, Google could figure out where you are within cell towers by simple triangulation. This location is then taken into consideration when you use Google's mobile search. The result is, more relevant search results. Without My Location, a local search query would look like this "Pizza in Cincinnati". On the other hand, with the My Location feature, a mobile search for "pizza" in any city would just be "pizza".
Now it makes you wonder if the technology can be used to track your mobile. Technically yes. But even without My Location, mobile phones are easily trackable. Still, Google does not want any issues on privacy matters so they are quick to be defensive. "We take your privacy seriously and have designed Search with My Location so that it doesn't associate your location with any personally identifiable information, even if you are logged in. We won’t send your location until you explicitly opt in, and you can always opt-out from the Gears Settings under the Tools menu." [Google Mobile Blog]
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