The increasingly popular location-based mobile game Foursquare recently announced a new addition to its service. A history function now shows who you were with in addition to where you were at a particular time. You will have a record of all the friends you were with at the Grizzly Bear concert two months ago–and the friends you didn’t invite can see that, too. The function could prove to be more than just a tool for jealous spouses, though.

At first glance the feature doesn’t seem to be much of an addition, since you obviously know who you went out with last Wednesday. The bigger trend is adding context to your past location and Foursquare (with similar other services) is seeking to find new ways to do that.

“We want to let you see how your social graph changes over time. You can look at who you were hanging out with five years ago. You’ll see the people you were spending the most time with and what you used to do with them. You can do all types of contextualizing with this kind of information, and getting the history out there is the first step,” Foursquare co-founder Dennis Crowley said in a phone interview.

The contextualizing Crowley is discussing can involve prioritizing your contacts. Of all the people who share similar interests with you, who is good for going out for drinks or a game of racquetball? Maybe this information can help Foursquare provide users with fine-tuned recommendations about places to go and people to see. Also, Foursquare plans to enable gazing into the distant past, back to 2003 (a lifetime in Internet years). Before Foursquare, Crowley was trying to break into the location-based service scene with Dodgeball, acquired by Google and then discontinued. However, Dodgeball users can build a full history all the way back to 2003 if they imported their data to the system before it shut down.

Gowalla, another location-based mobile service built on the idea of check-ins (when you go to a venue like a bar, you check yourself in with your mobile phone; the people with most check-ins at a venue get special titles or points), is thinking hard about bringing context to location. At Gowalla’s website, users have been able to read through their history since the service launched in beta a year ago, but the company is revamping the functionality along with the rest of its site. “Gowalla likes to think of the check-in as a ‘bucket’,” says CEO Josh Williams. “You can add various of things to that ‘bucket’ to provide context.”

“This might be the type of place you were at, the date, was it a special event, and so on. Two things we’ve added recently to the bucket are conversations and photos. Now, when you check in, a friend can comment on that check in and start a dialog. This makes it super-easy to say, ‘Stay there, I’ll be over in 20 minutes’, or, ‘Try the BBQ, it’s the best in Austin.’ Photos are great, too, and certainly add depth to the concept of checking in,” Williams wrote in an e-mail, adding that more features are coming to the check-in function soon.

Williams thinks contextualizing location in different ways will make a big difference to users and developers. “In the end, it [adding data to location] will make it fun for users to review the highlight reel of their lives and potentially fun for developers to mash up this information in aggregate, in the form of ‘visualizers,’ or who knows what. Lots of fun to be had here.”

Visualization is on Crowley’s mind, too. Foursquare’s website already provides lots of statistics about users, such as average check-ins when out, percentage of check-ins at new places, distribution of check-ins by day of week, and so on. Foursquare refers to the excellent and meticulously (or downright obsessively) compiled Feltron Annual Reports of Nicholas Felton, and Crowley says this type of information lends itself perfectly to some cool visualizations.

“What’s interesting about the Feltron Reports is that the data Felton has compiled lets you see how he has grown personally, and this is something we would like to enable in some form for other people,” Crowley said.

Crowley also said these features will be a part of Foursquare’s API, or application programming interface. Developers can take that functionality and use it in ways that Foursquare hasn’t invented yet; in other words, they’ll throw it out there and see what third-party developers can turn it into.

Getting a cool graph with bells and whistles about your social life can be interesting to you, but not to you only. The functionality opens the door to an obvious privacy concern: Not everyone wants to let people know who they were with even when they’re willing to share their location. The connections could spark conflicts (jealousy or maybe suspicions of leaking sensitive information come to mind) and raise questions about why these people are, or seem to be, connected. In any case this may be the type of information some people would not be comfortable seeing out in public.

Foursquare says it is wary of the privacy issues and backlash new features might incite (think Google Buzz) and this is why the functionality is restricted, at least for now, to users’ approved Foursquare friends only. Users can also delete history they don’t want to make public, and Dennis Crowley says that tools to hide or even delete friends from users’ history are easy to provide.

So, while the idea of building a personal highlight reel will appeal to many, Foursquare, Gowalla, Burbn (a newcomer that wants to bring rich media to people’s whereabouts) and all the other services based on people’s willingness to share their location will have to tread carefully.

[This story is part of a weekly series on location-based services, written by VentureBeat's JP Manninen. If you have an idea for a story you would like to see in this series, drop a line at jp@venturebeat.com]