I find the location thing of Google Now scary as well so mine is turned off too. I discovered my Location Dashboard a while back and the phone had been recording everywhere I went and at what time, which really freaked me out, so I turned it off. I can understand why people wouldn't want that.
Google Now can still work without Location History and I'm happy to keep it that way...I don't want data about where I'm going and how long I'm there for being sent off to a server somewhere. I find that concept frightening.
Must admit, i dont care. If they want to see what time my bus was or when i went for a coffee or went to work they can!