I also found this confusing, because I had blocked ads, trackers & malware through a setting in my VPN (Proton). The IP address is the VPN’s assigned IP address.
Location is always turned OFF, and I have turned off access to Location for every app, except AirGuard (always allowed) and Maps (when in use). But I don’t turn on Location or open Maps unless I’m actually using it to get somewhere.
I just tested the Fake Location setting; turned on Location and asked Maps to find my position – turns out I’m in Barcelona today (which is quite a way away from Sydney Of course, Fake Location plays havoc with using Maps
I would think that turning Location OFF unless it is necessary for something is better opsec than leaving it on. Fake Location will bugger up anything that needs it.
So, I’d welcome some more info about how to use this new feature, especially good practice guidelines and some idea of how it does what it does. Given that I use a tracker-blocking VPN, two of the three main threat vectors are covered, while the third is OFF unless needed.