When you have a Membership Contribution page setup for either membership signup or renewal, if you have the Pay Later option configured, as well as the Auto Renewal option configured, the Auto-Renewal option does not appear on the page.
This is seen when *NOT *using a price set.
If you turn off the Pay Later option, the Auto Renewal checkbox appears on the page.
Both options should appear on the Contribution/Membership sign-up page. During page verification, if both items are selected by the user, an error should be thrown, and a message shown to the user that you cannot select the auto-renewal with pay later selected.
I believe this issue started appearing around v4.6.8 or 4.6.9, and has flowed into the 4.7.x versions. Evidently, from a comment on the thread mentioned below, it continued in the 4.6.9+ versions too.
Here's a StackExchange thread where this is mentioned: http://civicrm.stackexchange.com/questions/10048/auto-renew-option-not-appearing-for-membership