So, many cities have bus systems and those bus systems now-a-days are usually GPS equipped for several reasons (notably that a central office can monitor the system and that the busses can announce ADA-compliant stop messages based on location without the driver being involved).
I'd love to have something on my phone that would tell me where the next bus was on a cool Google Map (or other) and an estimated time to arrival (which could be calculated by Google Maps). Of course, you'd have to get your transit authority to give you access to their GPS results.
But this would probably be one of the most helpful things a transit authority could do. The problem most people have with public transit is that it can be inconvenient, but often it is convenient if you have better/more complete knowledge of it. For example, when I get up in the morning, I have no idea whether a bus went by a minute ago and it'll be another 20+ minutes waiting or whether a bus is 2 minutes away.
This could also help trip planning. Often in a mass transit system, there are multiple routes to get anywhere. The trip planners we have today are primitive in that they often don't take current information into account (such as speed at various times of day, location of the next bus/trolly/subway train in proximity, etc.). Using GPS information would greatly change that.