In my case the map is generally correct (all UK-based to date) but can be horribly wrong too. If you use the date slider along the bottom of the window you can see where the phone has been on a particular day, and for me it showed odd days that were completely wrong. The main erroneous locations (Canterbury and London in particular) are familiar to me as places that IP-based location detectors choose for me when I'm on an ADSL service. However, there are other days where the locations are broadly correct - but with a scattergun of nearby locations that are a few miles from where I've been. Overall, I don't think that the data are remotely accurate enough to be useful, and certainly not accurate enough to stand up in court (as some commentators have suggested, in divorce cases).
If you think that you have nothing to hide, why not upload your location data to CrowdFlow.net. It's a project aiming to combine as many mobile phone location points as possible, to help visualise the distribution of various networks across the globe.
Apple has issued a press release on the matter of location data held on the iPhone: target="_blank">Apple Q&A on Location Data. Specifically it will be releasing an iOS update that reduces the size of the database cached on the iPhone, ceases backing up this cache, and deletes this cache entirely when you turn off Location Services. If you want to find out where your iPhone has been, do it before you apply the next update!