Geographic targeting is a vital part of search engine optimisation as it helps to dictate the end users market. Geographic targeting is the process in which hosting is based in the same country that the top level domain represents, along with it being in the same area as the website focuses its services. Think of it from this perspective, if you searched for car dealerships and you lived in Bristol, why would you want listings for car dealerships in new york?.
Alongside content, Google will filter results using geographic targeting, so next time you search, you get results tailored to your country, you can further reduce this to region. Generally the separation is done by visiting Google.co.uk or Google.com, but dont forget about Google.fr or Google.de, theres loads of countries, and lots of search engines with dedicated results.
If you search in Google.de you will get sites that concentrate on the business relative to the keyword query within that country, so Google.de will return popular car dealerships in Germany, whilst Google UK will do the same for the UK and so on.
Your hosting and top level domain will contribute heavily towards this, if you have a UK based website with a .co.uk domain that is hosted from the US, this will put a downer on your final search positions, this can be overridden with content and backlinks, but in general, the best approach is to keep your site and its hosting features in the same country that you deal with, unless you are in the Global market, in this scenario you would have domains and hosting split up based upon region.
Google introduced Geographic targeting shortly after the big daddy update, which saw lots of websites shift based on their TLD (top level domain) in relation to their hosting. This helps to provide even more accurate results, and to filter out results that would be useless to visitors and website owners alike. If your searching for a product to buy in the UK, results from the USA are hardly likely to be of any benefit.
Google webmaster central offers the ability for you to specify your target location, which is ideal, however, your hosting and TLD should reflect this.
