Location-Based Services (LBS)

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A location-based service (LBS) is a software application for an IP-capable mobile device that requires knowledge about where the mobile device is located.  Location-based services can be query-based and provide the end user with useful information such as "Where is the nearest ATM?" or they can be push-based and deliver coupons or other marketing information to customers who are in a specific geographical area.
A LBS requires five basic components: 

1) The service provider's software application,

2) A mobile network to transmit data and requests for service, 

3) A content provider to supply the end user with geo-specific information,

4)  A positioning component (see GPS), and

5) The end user's mobile device. 

By law, location-based services must be permission-based.  That means that the end user must opt-in to the service in order to use it.  In most cases, this means installing the LBS application and accepting a request to allow the service to know the device's location.
Although location-based services have been around since 2000, they have mostly been used in commerce with a subscription-based business model.  The release of Apple's 3G iPhone and Google's LBS-enabled Android operating system, however, has allowed developers to introduce millions of consumers to LBS.  According to the 2008 fourth-quarter report from Nielsen Mobile, a division of The Nielsen Company, location-based services account for 58 percent of the total downloaded application revenue for mobile phones in North America.

Source: Search Networking Tech Target