Perhaps you should post this at the IOS7 specific forum.
Sounds like to me... Your location is obtained by several methods, one of which is by zero in known WIFI routers in your area. My wild guess this setting is asking you, do you want to use WIFI as a method to triangulate your location?
And I hear, WIFI uses little power in comparison to the cellular radio.
You can always test it though, one day with, another day without, don't go by what I say, you have power in your hands.