The iPhone’s location feature is pretty cool; I showed it off to some family yesterday to appreciative “Oohs” and “Ahhs”, despite the relative lack of precision from the cell phone location feature. One academic, however, has cautioned that the Wi-Fi Positioning System used by the iPhone and provided by Skyhook Wireless could be subject to tampering.
Professor Srdjan Capkun of the Department of Computer Science at the Swiss Federal Institute of Technology in Zurich showed that Skyhook’s system, which is based on the MAC address of Wi-Fi routers is vulnerable in two ways: firstly, from faking or “spoofing” a router’s MAC address, which is often easily done with the standard firmware, and secondly, from jamming the signal of legitimate routers. Either of these scenarios could make it appear to an iPhone user as though they were somewhere else entirely.
At the moment, that’s more of an annoyance than anything else, but as Professor Capkun points out, it’s something that “security and safety-critical” applications should take into account before relying too heavily on the Wi-Fi system.
Absolutely nothing more than an annoyance. This is neither a "huge security threat", nor important. If the map is so far off that you "appear somewhere else", your IQ should be able to compensate to maybe look at a street address and enter it using drop pin.