Over at the Google Code Blog, there's a pretty significant announcement, about the release of APIs for Latitude. the idea, as you might expect, is that the best way to get good location-based applications is to put the tools for building them into everyone's hands.
A glance at the online documentation reveals an essentially-RESTFul API with JSON payloads, which should be easy to use from an Android app. It seems likely that a device which knows its location is a really good platform for building location-sensitive apps.