There is nothing malevolent about IP Locator or DNSStuff.com, nor do I think the other user's comment meant to imply that there is.
IP Locator simply takes an IP address (yours, by default) and looks up its parts in a database and returns the geographic location, if known.
I believe DNSStuff.com uses a commercial database of geolocation information which -- it's possible -- may have been built (at least partially) in the manner described by the previous poster. However, there is nothing in this widget that returns any information about users (beyond an IP address) to me, DNSStuff.com, or anyone else for that matter.
I applaud the efforts of our friends at hostip.info to create a free database of geolocation information, based on voluntary contributions. Right now, I believe the database used by DNSStuff.com is slightly more accurate.
In any case, thanks for taking the time to look at IP Locator. Watch for some great new features in a future release including resolution of hostnames and mapping of locations!
-Andrew, developer of IP Locator