If I the Find My iPhone app to check on the location of someone in my friend list in the app, are they notified in any way that their location is being revealed to me?
There is no immediate indication on the device that it is currently being tracked, only that GPS is in use by something.
Invoking the GPS will cause the location services arrow to appear in the top bar. The catch is that going into the settings, General -> Privacy, the user can tell what. If FMI is being used currently, the arrow in its box will be purple, and if it was used in the last 24 hours, the arrow in its box will be grey.
However, the user can disable the Find My Iphone feature with a simple toggle in the same menu.
The other answer regarding the location services notification icon is absolutely correct, however I would disagree that it's obvious given that many users use location services all the time and seeing the triangle isn't anomalous behavior.
Another point of order: if the poster leverages OS X Server's policy manager and configures a policy to prevent it, the user cannot trivially disable the feature.
A less clandestine approach may be to install the Find Friends app which can let the user know that someone has requested location, but may be preferable to incessant phone calls and messages that demand a response. It may be awkward either way depending on the relationship you have with the user.
My friend got an email after someone checked her phone.
Dear (User Name),
Your Apple ID (firstname.lastname@example.org) was used to sign in to the Find My iPhone app on a new device.
Date and Time: September 25, 2014, 8:02 AM PDT
Device: iPhone 5s
If you recently signed in to the Find My iPhone app, you can disregard this email.
If you have not signed in to Find My iPhone recently or you believe someone may have accessed your account, go to My Apple ID (https://appleid.apple.com) and change your password as soon as possible.