*All* apps need permission to access your camera roll. It's kind of good that apple are applying their rules to themselves at least. And yes, it is confusing - I hit this issue with my last app (NightCap - there's a separate thread about that on the forum) and didn't understand what it was at first.
The reason is, as said already, that photos contain GPS data. It's not all that much of an issue, but in theory an app with access to the photo album knows where you've been, when, and has photographic evidence. If you're using that data to make a video it's OK, but do you want say a free game to be accessing that kind of data without you knowing?
The sad part is,if there was no warning there I reckon nothing bad would actually happen, but some security researcher would build a free game that tracks where you've been. They'd be banned from the app store, but gain headlines around the world and most likely a well paid job!
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Then Apple needs to change its permissions system. I don't want to be the victim of an attacker who decides to find out where I am by hijacking the iMovie app.
If I had no go tagged photos, would iMovie still ask for permission to use Location Services?
An attacker can't find out where you are using the iMovie app, just where you've been (and they'd need access to your phone to do this - in which case they know where you are already!)
And yes, it will still ask for permission if you have no tagged photos I believe. The permission is actually to access your photo library - permanently. So even if you have no tagged photos, you might add one tomorrow. If it didn't ask permission today but it suddenly did tomorrow it would be a bit weird and a lot of people wouldn't trust it!