MacOSXHints posted a guide on iOS4 Location Services privacy settings

As iOS4 is being released for upgrading today (you'll need iTunes 9.2 to do so), a lot of new features will be introduced. Many are brand new, but some resemble features introduced with the iPad and iPhone OS 3.2, and are improved beyond that.

One of them is the Location Services Settings, especially with respect to privacy controls.
In iPad, a little NE pointing arrow appears in the top bar to alert you that the GPS is being accessed from an application, and that function is now in iOS4 as well.

What's new is the ability to toggle on or off the ability of apps to use Location Services on a per app basis, much like Notifications. If you look in Settings » General » Location Services, all the apps that make use of the GPS are listed, along with the NE arrow icon if they have used Location Services in the past 24 hours. There is also a toggle switch for each app, to enable/disable the services.

  iOS4 Location Services privacy settings