Search engines, and more specifically Google, strive to deliver results that are the most relevant for a user's search. And one of the factors that is relevant to a large number of searches is location.
Let's use a legal services search example. If a user searches for a law firm, in many instances, they may want to find one near them. In order to deliver results that have a location component, search engines use location-based customization. In other words, they tailor relevant results base upon the location of the searcher.
Google uses an auto-detected location for users based upon the following:
- Your IP address
- Google Toolbar's My Location feature.
There are varying reports of the accuracy of the use of IP addresses for determining location. Nonetheless, if your target audiences (prospective clients) look for you locally, you need to think about how location-based results might impact your visibility.
Of course, IP address isn't the only factor that Google uses to deliver location-based results. In fact, merely changing the location setting on a result page can have a huge impact on the results.
Let's look at a specific example. Here's a search for the term [injury lawyers] with my location set to Chicago, IL:

As you can see, Google is doing a pretty nice job of serving up relevant results that include various injury law firms located in Chicago.
Now let's look at this same search for [injury lawyers] when my browser's location is set for Waukegan, IL:

A much different set of results. And as you might suspect, the results include injury attorneys located in Waukegan.
Naturally, the questions becomes, how do I optimized for local search for my target audience?
Here are some tips:
While you can influence some local search ranking factors, there are others that are more difficult to change. Here are David Mihm's top 5 local search ranking factors:
1. Physical Address in City of Search
2. Proper Category Associations
3. Proximity of Address to Centroid
4. Domain Authority of Website
5. Quantity of Structured Citations (IYPs, Data Aggregators)
While you can update your category associations, domain authority and citations fairly easily, it's going to prove much more challenging to change your firm's physical address and distance to the centroid.
While you might be tempted to "game" local search results to get visibility in larger markets, it's not worth it. You're more likely to harm your local search visibility than to gain some perceived advantage.
Follow the Google Places Quality Guidelines. Focus on the ranking factors that you can actually influence. Track you local search results.