Yes, it does say that. The phone says it when using the location service (it's not Apple maps).

GPS doesn't work very well inside buildings. WiFi might work inside when GPS doesn't. WiFi location is very approximate. Also, there is no inherent location associated with a wifi router. "Somehow", the wifi SSID has to be associated with a GPS or triangulated tower location and stored in a database. Apple might want wifi on to collect that information.

So, you are generally better-off, sometimes, with wifi on (Apple is trying to make things simple).

Keep in mind that wifi range is very limited. If you are outside, you are typically out of wifi range (having wifi on or off is irrelevant).

Smartphones GPS receivers work as well as handheld dedicated GPS units (basically).

Because smartphones have other stuff, they have some tricks that dedicated GPS units can't use.

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GPS units are typically used for relatively long periods.

Smartphones often use location data for quick hits (very short periods of time). GPS doesn't work well for that. That's another reason smartphones also use towers and wifi.