It turns out that text below the cut is a rare muff by the Urban Legends Reference Pages. The usually accurate Snopes was explaining the difference between the E911 only call and the "Location On" option that's found on cell phones.
As it turns out, they got the difference wrong (or, in reading it over, I think it was misleadingly worded).
As tabrumj explains here: Most modern cell phones sold today have E911, which allows a properly equipped dispatching center to get your GPS information when you actually dial 911. The "Location On" option pretty much means your GPS position can be tracked at any time, with the cell phone company holding the data.
tabrumj's explanation is backed up on this CNet review of the Audiovox CDM-9500 phone.
Apologies for misleading anyone.
Also, big thanks to first_spike for answering my question about how this same process works outside North America.
So, in short, leave your phone on E911. It's more than sufficient to cover your emergency needs (again, provided the answering dispatch center is properly equipped).
The Urban Legends Reference Pages has an interesting write-up about what your cell phone's "Location On" option does.
As always, the original rumor was misleading, but came with a bonus grain of truth. Here's the important bit:
...When a cell phone in the (default) "E911 Only" setting is used to call 911, the handset transmits information that allows PSAPs to retrieve data (e.g., the caller's telephone number, the address of the telephone's registered owner) from an Automatic Location Identification (ALI) database, information which they may be able to use to dispatch emergency services to the correct address (even if the caller is unable to supply it). When a phone in the "Location On" setting is used to call 911, the handset also transmits GPS information which PSAPs can use to determine the caller's location with a fair degree of precision (i.e., to within 50 to 300 meters), information that is especially useful if the caller is lost and/or stranded in a remote area. Neither setting allows a cell phone to be traceable "all the time" — in both cases, the user must place a call to 911 before any location information will be sent to emergency services dispatchers.
(Keep in mind that all of this information is variable — whether this particular feature will work, and how well, depends upon factors such as the model of handset you use, which carrier provides your wireless service, what equipment is available to whomever you call, where you're calling from, and current atmospheric conditions.)
Now that is a nice piece of information to know, especially if you're calling 911 from your cell and you're in an unfamiliar place or aren't sure of your exact location.
*switches cell location option from "911 only" to "location on"*
ETA: I'm not sure if this actually applies outside of the U.S., so I guess this is information my U.S.-based peeps might find interesting.