SSIDs are a signal you broadcast to identify yourself. if you don't want people receiving that signal, stop broadcasting it. if i stand on my roof and shout at the top of my lungs "HEY LOOK AT ME", i can't then expect people not to look at me. broadcasting your SSID is essentially the same thing, and you can't blame google for the fact that your router does this. pretty much any router will allow you to turn off SSID…
You don't have to broadcast an SSID (the human-readible name for the access point) for Google's system to pick it up. I'm pretty sure (based on some packet sniffing I've done on the Android Google Maps app suite) that Google's grabbing the BSSID, the MAC-address-like thing that uniquely identifies a Wifi wireless device. Even if you turn off SSID broadcast, your router will still send out broadcasts of some sort.
What ever it is that google is noting down about the broadcasting station and tagging it with its lat-long, if it also appears in some form in the packets that originate from a host behind this station, then some one can infer the geographic location of this traffic source. Is that the case here?
Unless that's the case, is there any other way someone can misuse this? The only other exploitation I see is tracking a router from it's point of sale to it's point of deployment and finding out the location of the buyer. Where else does the BSSID of the station appear other than within it's geographic neighborhood and the manufacturer's/retailer's database?
May be the database should not be indexed directly with this BSSID but a one-way hash of (BSSID, something-about-the-neighborhood) - to make sure no one can do an arbitrary lookup but will already need to be in the neighborhood of the station to make a successful query. At least it will raise the bar.
I in fact would like to use this in my app! Continuous location tracking using GPS drains out the battery so fast that it is not even an option for me. The significant location change accuracy is not good enough for what I'm doing. I'm trying to figure out how to use this service. Does any one know?