First, Google just ditched a bunch of "projects" because they weren't making money.

Would they have started this project if they didn't expect to make money or expand it? (my guess is no).

Down the road we'll absolutely see opt-in for coupons, discounts, etc based on your location showing on a map. The advertiser will not be privy to this but there will probably be some incentive to the users to keep themselves logged into the Google Latitude.

This is probably the angle Google expects to take rather than dabble in the trendy and unprofitable social media space — and probably why you don't see them making a bid for Twitter and/or Friendfeed. Both nice services but no profit model on the horizon.