Apple's new patent: Latitude-like native app coming to the iPhone
Unlike Latitude, Apple's method of location sharing involves sending SMSes or 'instant messages' between phones. The message would be encoded in such a way that the phone can then extract your current location. Locating sharing (abstract and diagrams here) is only part of the package -- another patent titled 'position fix indicator' focuses on ways of displaying the user's location, and the location of people that you're 'bonded' with (shown in the diagram above).
The diagram also seems to suggest a forward-facing camera, something we've long expected to see on the iPhone. It's possible the diagram is just a placeholder (it looks identical to the one used in other patents), but it could be indicative of a forward-facing camera in the iPhone 4G arriving in 2010.
Let the stalking commence!