The iPhone Tracker is a simple Mac OS X application that maps the information that your iPhone is recording about your movements. So despite the name, it doesn't actually track or record anything itself: it only extracts information from files that already exist on your computer.
To try this, you'll need to run the program on an OS X system that you regularly sync with an iPhone (or an iPad with a cellular plan).
Essentially iPhone Tracker will then examine your /Users/<your user name>/Library/Application Support/MobileSync/Backups/ for the hidden tracking file. If present, this should contain a list of positions where your iPhone has noted your location, defined by a latitude and longitude figure, and a timestamp. And the program then displays this data on a map so that you can see exactly what's been recorded.
Can you stop this from happening? The iPhone Tracker authors say no. Turning off GPS won't help as they believe the location information "is determined by triangulating against the nearest cell-phone towers". And while you can delete the local file, the information is still being collected by the iPhone itself, and a copy will appear on your system again when it's next synced. Check out the author's FAQ for more information.