Here’s Microsoft’s explanation for why the geo-tracking will not offer much control. It’s also the paranoid’s greatest fear in a nutshell:

The reason, Microsoft officials say, is that Windows doesn’t have a reliable means of determining that an application is what it says it is, so any attempt to limit the location to a specific application would be easily spoofable.

So the short story is Windows 7 has geo-tracking features, but aside from turning them on and off, you have basically no control.

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