Zeus said:
Lord of the Rings Online has a cool compass system. It directs you with the standard dot, but when you get close enough it goes away and shows a giant blob colored area instead. The point being, here's the general area, now you find it.
It's a nice compromise between being on your own and blindly navigating by dialog alone, and having a big obnoxious arrow lead the way until you're two inches from your destination.
Ever heard of real maps?
Games should have locations marked on a map as accurately as would be realistic in the context that the location is marked on the map. They could have maps with different scaling. A world map, a town map, even a building map (such things exist), except the player would have to either buy or find and steal such maps.
What they shouldn't have is a fucking player arrow moving on the map like magic, unless the game is really fucking exceptionally good at rationalizing it as real advanced magic that everyone uses like the internet in the real world. Otherwise, learn to read a map, please, and accept that if your target moves, you won't get to know its exact location until you actually find it.
(I guess someone might say that the arrow is there because it's the PC who does the map-reading for the player. My counter to that would be: such games are crap, and they wouldn't need to be. Remove the arrow, because it's NOT immersive. A game isn't immersive if the player doesn't do the things that he would do if he were the character in the game world. Moving your party of half-naked fags from one cutscene to another is about as immersive as drinking shit diet coke while watching the newest crap from Ron Howard. Shit.)