Cell Network Search looks for nearby cellular towers to aid in determining your location. This speeds up GPS location.
With the rough location provided by cell tower triangulation the iPad can download the GPS satellite data, which it would normally take a few minutes from the satellites themselves, in a few seconds. In the absence of good GPS reception the iPhone can still give you a rough approximation of where you are, letting most apps that need location to work to some degree. This is usually a bit more accurate than the wi-fi location method.
If you turn it off the iPad will rely on locating local Wi-Fi networks instead to try and do this.
These are background tasks.
While Apple does collect this information, it is supposed to be anonymized, meaning that they know that a device was there and what it saw, but not what device was there. This data is used to improve the the location services, updating the database of cell towers and wi-fi networks.
If you want to keep better tabs on whether an actual app is using location services in the background, you can switch off Status Bar Icon at the bottom of that settings page.
