Here, you need to decide if you want the iPhone to track your location. Enabling location services will allow you to use Google Maps, geotag photos, use Find My Friends, and take advantage of other location-based services (like Foursquare).
Our recommendation: Right now, enable location services. When you're done with the activation process, go to Settings > Location Services, and manually enable location services for each app. For instance, you can leave location services on for Maps, but off for Photos.
If this is your first and only iOS device, select the first option, which will allow you to create a new Apple ID, or sign in with your existing one. If you've been purchasing music and movies through iTunes (before you had an iOS device), sign in with the Apple ID you use for purchases.
Otherwise, select between restoring from an iCloud backup or an iTunes backup (you'll likely have to plug your phone in to do this).
Finally, your first encounter with Siri, where you'll decide if you want to use the service or not.
If you enable Siri, be aware that your usage data is sent to Apple for the purpose of improving the product. For example, whenever Siri doesn't understand you, Apple engineers will get this data, which will help them work on Siri's artificial intelligence.
By sending Apple usage data, you help them improve the software by passively informing them of bugs. This is generally safe, however, remember that this usage data also includes your location information.
In the end, opting in or out doesn't affect the function of your phone.