Another Apple patent today looks remarkably similar to the functionality of Google Latitude which Apple relegated to WebApp status earlier this year. Obviously if Apple is working on their own version of Google Latitude (or owns the IP rights to this functionality), they'd be hesitant to put an app with the same functionality on their devices from another company. Now it all makes sense!
In Apple's implementation, it looks like the location data can be carried in an SMS or Instant Message (interesting news in its own right), which can then be opened in the Maps application to show the other person's location relative to the iPhone user's.
Also, note what appears to be another instance of a front-facing camera on the iPhone image
