It's only illegal to record you if you don't know you're being recorded. You know when you call up a 1-800 number and hear the message 'this call may be recorded for training and quality purposes'? Since you've been notified they can record the call, not that everyone pays attention to the message....
All kinds of businesses like credit card companies, utility companies, doctors.... They collect all kinds of private information, and must provide information on how such information will be used, and who it can be disclosed to. By using the service you're basically giving them permission to use that info in the way they told you they would. Of course some of these companies use the info in other ways they don't tell you about, but unless you can prove it there is nothing you can do.
All Apple would have to do is put somewhere in print that the software is there, and what it does. As it says in the article, they can and probably will claim it as a security device to protect you from having your phone stolen. Sadly, a lot of people would see this and not think twice because they're told it's there to protect them.
Also, in most usage contracts I've seen, in there somewhere it states that the company reserves the right to terminate your service for any reason. This generally only applies to you doing something wrong with the service, such as getting banned from this forum for trolling. However, if Apple decides to disable something on your phone because they don't like what you're doing with it, all they have to do is point to that clause and tell you that their TOS says that program can't be used like that. Usually when you download anything or sign up for an account of some kind they have this long list of their TOS, and you must click on something along the lines of 'I accept' to finish. Who actually reads those? I only skim it most of the time.