I'm not positive about this, but I got the feeling from the keynote that Nearby Contacts does not gather GPS data from your contacts but instead uses your GPS location combined with their physical address from you contacts list to calculate the distance from you to their home. The same sort of functionality is basically available in Google maps since it recognizes coordinates and physical addresses; this just streamlines the process. The app development walkthrough in the the keynote mentioned the app only required around 300 lines of code and mentioned nothing about pulling data off of a server which I think an app like Loopt would have to do to get other people's GPS coordinates.