What exactly does Background App Refresh in iOS 7 do?
The setting to enable or disable Background App Refresh is applicable for both WiFi and cellular. There is no way to disable it only for cellular data. So yes, apps that use location services can drain your cellular data plan.

Possible solutions:


Restrict which apps are allowed to use background refresh. You can thus limit the amount of data usage by turning on this setting only for the apps that you need background refreshes for.
Turn off cellular data for specific apps from Settings->Cellular (this page also shows the cellular data used by your apps). This would completely restrict those apps only to WiFi all the time though.