IPhone – What does “Lost Mode Pending” mean

The only thing that matters on iOS 7 is whether you have fine my phone enabled. Also, you can't turn off location services when you have find my phone active.

If so, you can't get iTunes or the device to erase itself unless you enter the password for iCloud account that is enrolled.

If you do factory erase it, it still won't re-activate unless the iCloud password is entered. So, to answer your question - location services is likely not re-enabled since the device lock prevents activation of the OS and opting in to location services before the wipe. It would either require access to the source code or servers from Apple to know if location is tracked in is case, but my intuition is no.

If you enable lost mode, that locks the device, but it still is traceable and can be located. Just as if you didn't enter lost mode.

If you erase the device, that removes the data and tracking ability once it connects to the Internet and receives the self-destruct message. It still displays the lost message, but you can't track it.

They could just have to phone turned off. Although if your phone is logged into itunes, it's POSSIBLE (with forensic software or more knowledge than most iphone thieves) to get your itunes user and password and then of course they could turn it off. However, I think it is an easy thing to determine if someone else is logging in with your credentials, so I'd be willing to bet that they just have the phone turned off.