Really? I was under the impression that pure web apps had no access to the iPhone's geo-location or geo-suggest capabilities.
Yes, that is right. The difference with the <location-chooser> is that after the user enters a specific location manually, Yahoo! uses its infrastructure and provides back to you more relevant location data.
For example: The user types in "San Francisco" the Y! Blueprint back-end will run a geo-location search on this search term and provide you back with much more detailed data such as San Francisco, ZIP-Code 94109, California, US etc.