Go to All Settings->General and select Accounts and Sync (I know, there's that Location button right there, but if this was easy people wouldn't be asking...)
Select your Google account. I'm trusting you won't do anything crazy with the fact you know I have Zynga installed on my phone...
Choose Location Settings
Turn off "Let Google Apps Access your Location" -- note that bit below where it says "Google Apps may access your location when you aren't using them." That's the bit most people don't realize.
Now, you'll notice that I didn't turn off my location services. Honestly if someone like Google or the Federal government or the Illuminati want to know where I am, I'm pretty sure they can find me. It's part of living in the world, and I don't just mean the modern world -- powerful people have always had a way to find out what they want to know, and our attempts to hide are usually amateurish at best.
A couple related blogs you might want to look at:
Lack of Privacy as a Celebration of Life
Deja-Google and the World Traveller
Netflix is Watching
Your Phone is Spying on Everyone
They Know Where You Are: Privacy and Google Maps