Ive noticed a change in my battery life as well.
Basically, the three options are how much you want your phone to search for your location. The first one (use wireless networks) finds your location by what towers you are hitting off of. This is good if it only matters what town you are in for what you use (such as weather, camera, google, etc). The next option (Use GPS satellites) will use GPS as well as network to pin point your location. You will at least have to turn this on if you want directions from a program such as google maps. THe third, to be honest, Im not quite sure what it adds. I guess if signal is low, it can be used to better pinpoint your location but I have had good results with just the first two checked. I do check the third one though if I am trying to get directions from my present location to a certain address but usually I keep it off.
Hope that helps.