Foursquare announced in December that it has reached 15 million users, Facebook recently acquired Gowalla, and the number of sites and apps offering check-in functionality is continuing to grow. With such a flurry of activity, we thought we would take a minute to “check in” with what is really going on in the realm of location-based services.

Though location-based apps have generated significant buzz (dominated primarily by foursquare, Facebook Places and Gowalla) over the past few years, they still command a very niche user base. Forrester Research reported last month that only 5% of U.S. adult internet users use location-based apps at least once a month and some went so far as to predict last year would be “the year the check-in died.”

But far from writing off location-based apps, we see a huge opportunity in 2012 for marketers to foster smart interactions with consumers. What’s more, marketing tactics using location-based apps can range from simple to complex. And, for the right target, they are, well, just right.

Still not sure what checking-in really means? Well then, a basic primer before we move on: People use their smartphone to check in to a location—be it a store, their favorite lunch place, a park, or their house—and broadcast it to their network because they derive some value from it.

Foursquare awards virtual badges for checking in, smart retailers offer incentives to check in, and the apps allow you to “discover” new venues as well as friends at nearby locations. Those predicting doom and gloom for location-based apps say the motivators for checking in are too small, the novelty wears off, and they’re stuck at a 5% adoption rate. Others say the apps reward decisions already made (only after checking in to a Starbucks are you presented with a coupon for $.50 off a pastry) and have little staying power as a marketing tool.

Sure, collecting badges on Foursquare may not seem like a huge motive, but for some—like the young, male demo that was quickest to start using Foursquare—the competitive game element may be just enough. And yes, one may have already committed to spending $4 at a Starbucks, but a coupon represents an upsell opportunity and encourages future behavior.

Savvy marketers recognize this as a time of unprecedented opportunity: consumers are publicly promoting their interactions with brands and letting us know how and when to talk to them.

Since people often share their location across their social networks, incentivizing check-ins is not just about one sale. It’s about encouraging people to tell their hundreds of friends that they are in your store, presumably buying something. So give them something of value. For instance, Arby’s reserves tables for the Foursquare “mayors” of its restaurants; last fall, for every check-in to one of its stores Walgreen’s donated one flu shot to someone in need. And countless mom-and-pop sandwich places are throwing in a drink and bag of chips with check-in.

Whether location-based apps will have flourished or failed by the end of 2012 remains to be seen. In the meantime, people will be checking in to your location, and it would be smart to engage those customers that are raising their hands, saying they are willing to interact with your brand.