Location Services being on systemwide sends your location 24/7 to Apple. It's not just GPS reception, it also uploads the list of wifi MAC addresses it can see, with signal strengths, to improve its location fix.
Edit: Yes, this is confirmed in Apple's privacy policy for location services.
"If Location Services is on, your iPhone will periodically send the geo-tagged locations of nearby Wi-Fi hotspots and cell towers (where supported by a device) in an anonymous and encrypted form to Apple, to be used for augmenting this crowd-sourced database of Wi-Fi hotspot and cell tower locations."