The icon is always on because MyLocation is always reading your signal to detect changes. I used to use iWidgets and had MyLocation installed for that, but once I got Dashboard X and was able to place my Weather widget on the homescreen (my major reason for iWidgets) I uninstalled MyLocation. I use Forecast and Forecast does
not need it.
If you need this for weather on your lockscreen/homescreen you might try Forecast and Dashboard X. Or maybe Springtomize has something you can use. Either way, the only way to get MyLocation to stop displaying the Location Services icon is to uninstall it.