#1 is only a grant of permission to collect location data from your handset - but not a power management control. It might mean that a small amount of additional data traffic occurs when either GPS or WiFi are already on - but doesn't affect *whether* those devices (WiFi and GPS) are powered up. So it applies at all times but is only meaningful when those devices are enabled by other means - either manually or automatically. Think of it as nothing other than a legal escape hatch for Google against privacy violation lawsuits.
#2 allows the *WiFi* hardware to be powered up for *reception* (probably with no indication that it is indeed dissipating power!) - but it won't try to associate and connect with any WiFi APs that you have set up. It is listening for beacons only*, and possibly band-hopping, if not channel hopping**. Think of it as "receive only WiFi"
It is my *guess* that #1 affects #2 - there shouldn't be any data collection if you have not allowed it so the #2 toggle state should not do anything if #1 is set to disable.
Having the WiFi radio in receive-only mode might not really use any noticeable amount of power for two reasons: 1st, because operating a radio in Rx mode only uses far less power than Tx mode, and 2nd because it is possible that when both #1 & #2 are enabled, the WiFi radio is only polled, rather than left on full-time. So, it's duty cycle might be extremely low.
None of the above speculation has been confirmed by me by looking at source code.
Whether or not this is important to you depends on your need for high precision location information. Parents that snoop on their kids' handset locations might want that WiFi listener stuff turned on - GPS does not work indoors in many locations.
* note that the geolocation databases (that map WiFi AP MAC addresses/SSIDs to lat/lon) are on Google servers, not on your phone - so this implies that there must be a way to get the data to Google even if the WiFi is "pseudo-off: receiving but not transmitting". Presumably this would then happen via the Mobile Data radio (LTE/CDMA/1xRTT)... which - perversely - would use even more power than a WiFi connection (for the same data).
**WiFi APs are supposed to broadcast their beacons on all channels (the beacon packet tells the STAs what the correct channel they should "talk" to the AP on). So it might be necessary to band-hop the receiver to account for single band APs, even if it is not strictly necessary to channel-hop within a band to observe available beacons. In any event, bear in mind that power usage by WiFi chips that are never transmitting is far lower than when transmission by the WiFi radio is also occuring.
Last edited by bftb0; 3rd February 2014 at 08:23 PM.