How do I list posts in a custom post type by taxonomy term?

Have you ever wanted to list out posts arranged by a taxonomy term associated with that post? This is something that I recently ran into when trying to create a select drop down list of hospital locations arranged by the taxonomy of location type. For example:

Hospitals
Location Post #1
Location Post #2
Location Post #3

Urgent Care
Location Post #4
Location Post #5
Location Post #6

Clinics
Location Post #7
Location Post #8
Location Post #9

and so on.

Well good news is I found a solution:

"We get all the terms of a taxonomy, loop through them, and fire off a title link to each post that belongs to that term."

Original source: https://wordpress.stackexchange.com/questions/66219/list-all-posts-in-custom-post-type-by-taxonomy