This is an important story, but a little difficult to summarize. Here's my attempt at an overview:
1. Google stores location history data for more of its mobile users than you might expect. The precision is greatest when GPS is on, but less precise data from cell towers and WiFi sources is used almost any time a Google app is being used on an Android or non-Android phone. There have been cases in the past where Google has recorded such information even when the user has explicitly turned off all location services, but Google says they have stopped this practice.
2. On multiple recent occasions, police in North Carolina have quietly been successful in obtaining search warrants that force Google to turn over these records. Rather than "standard" search warrants asking for the location of a particular suspect in a crime, these "reverse" or "area based" warrants ask for time and location data for all users who have entered a geographical area during a time of interest. The records returned are initially anonymous account numbers, and the police then make followup requests for identifying information of the subset of accounts that they think are of interest to the case.
3. This open-ended "drag net" approach scares some people. Typically, at least in the US, suspects are identified first, and then further information is gathered that confirms or removes the suspicion. The express fear seems to be that innocent people will be falsely accused due to coincidence, but there is also a more general fear that once mechanisms are in place that allow the police to have easy access to location tracking information, this information will end up being abused.