[Should I care about] Location-based Services (LBS)

Even before the latest peak in downloads of scvngr  Location-based Services had a huge buzz in the internet community; Foursquare's and Gowalla's (both launched last year) growing user base put Facebook under heavy pressure. So heavy that about a month ago they launched their competitive service called Facebook Places.

Location-based services promise to "socially engage" users for your local business like cafés, bars, museums and similar public places. But how do these systems work? Why is there a hype about them? How do they try to keep this promise and what would I - as a business owner - have to do to participate? All boiling down to one major question: Should I care about Location-based Services?