So I'll say it again in another way - if a pop-up on your iPad/iPhone/iPod touch comes up and asks "Application xxx would like to use your current location" click DON'T ALLOW. Otherwise, it's your own damn fault if they collect location-based information. It isn't that difficult of a concept.
What some people don't understand is that the problem is not that Apple, AT&T, or others will have access to some data. This can be useful or essential in some circumstances. Few people would object to 911 operators being able to locate you, or Find my iPhone allowing AT&T and/or Apple to help you relocate your phone or do a remote wipe, if you so choose.
The problem is that it is Apple and not us who will be choosing who does or doesn't get our information, with little to no transparency or accountability.
According to the OP:
The new privacy policy does not specify which third parties may receive access to the collected data, nor does it mention how long Apple may keep the data.
The new terms appear to give Apple the right to collect and provide data to whomever they want, for whatever reason, for as long as they want, whether or not we know about it, without giving us a right to refuse and without telling us what data will be/were shared. Do people really not see what is wrong with this? The privacy policy only give examples of what location data might be collected or shared. Once I click to let app X use my location data, the policy as it stands appears to allow Apple to give this and related information to essentially anyone they want.
Even if my name isn't clearly attached to a specific piece of data, it is still my data; and it is obviously valuable, otherwise companies wouldn't be falling over themselves and each other trying to squeeze every last ounce of data out of me. I shouldn't have to turn off location services and significantly hamper my experience on my iPhone (which I am paying for both up front and monthly, mind you) just to keep Toyota let's say from getting data detailing my every movement. Just because it's in Apple's TOS or privacy policy doesn't make it okay.
People defending Apple on this are presenting a false dichotomy: either allow Apple to collect and share your data to whomever it wants, or else turn off location services, crawl into a hole and put on a tin foil helmet. Certainly you can see there is middle ground, right? There is absolutely no reason Apple couldn't clearly define who gets access to what data, and/or give users more of a say in the matter. Apple can nitpick App submissions, but they can't nitpick data management?
To people who think we should just trust Apple to do the right thing: Does anyone really think that Apple accidentally left a huge "loophole" in their privacy policy allowing Apple to give access to data to practically anyone they want? As much as I love Apple, I'm not seeing why we should trust a company that gives itself such widespread control over our data; on this one I don't see why they deserve the benefit of the doubt.
Apple changed the terms after millions of people have already pre-ordered or reserved their phones. They are a corporation; their purpose is to make money. So it's not their fault per se, but consumers need to be vigilant and vocal. We should not see the erosion of privacy as inevitable or the required price for having the latest, greatest technology. Consumers should be informed who gets their data before they get them and be able to opt out. For those who don't care who gets what data, there can be an option to allow anyone to have it. It should be an actual option, not a provision buried in a policy that is all but forced onto people who want to actually use the phone. I shouldn't have to choose between not ever using location services, or allowing Apple to give my location to whatever nameless parties it wants.
Enough people apparently complained about the blue progress bar in Safari 4 for Apple to bring it back in Safari 5. Apple does listen to its customers. Hopefully enough people will complain about the new privacy policy to Apple so they will change it.