I strongly suspect Google has two separate classes of location history. Data which has been anonymised, and data which hasn't. I strongly suspect that your location history always exists, and that "turning location history on" only gives them permission to keep it personally-identifying.

Google make a lot of use of location data. It's used to map traffic in Maps, and is/was/? used to map wifi to improve geolocation. These reports are just another example. And they'd all work just fine with anonymised data.

(I have no proof of any of this, hence over-using the phrase 'strongly suspect'.)