Geo Targeting:

A simple explanation of geo-targeting is that the 'ideal' is envisaged to be is that if a searcher in Sydney types 'plumber' in Google and person in New York types 'plumber' and a person in Hong Kong types 'plumber' all three will get a list of plumbers from there geographic location.
An overview of possible methods which may/are/will being/be used to determine Geo-targeting by Google could possibly include:-

1. Domain names – This is the most obvious. Different country’s have different TLDs (Top level Domain) ie .au, .hk, .uk etc It is interesting to note when I went into Google webmaster tools to set my Geographic target I was greeted with this message Your site's domain (.HK) is already associated with the country/region: Hong Kong and I see that no option to change this is available. This would suggest this is a very important factor in Geo-targeting to country specific data. It would also suggest it may be a limiting factor in targeting outside a country.

2. Google webmaster tools - Set geographic target - Associate a particular geographic location with this site if you are targeting users within that area. I would assume this is quite powerful as you are actively telling Google the location you are targeting.

3. Hosting Location – As stated in the patent applications and Matt Cutts interview quoted the IP address of your server is very important in Geo-targeting. It appears Google will be trying to match Search results to websites that target the same Geographic location. There is some confusion here. Some things like Matts interview seem to suggest that this method of Geo-targeting is not that desirable as it “limits options” I think that this will be more used as a way of judging where the searcher is located rather than the IP of the servers host.
Quote:
Matt: Well, one thing that should be possible is to indicate some sort of preference, or some sort of origin of location where you can indicate where you are. Historically Google has been ahead of the other search engines at the time by not just using the top level domain, so .ca, but also the I.P. address. So you can have .com hosted in Canada and that’s worked very well for many, many years. But we do continue to get feedback that people would like more flexibility, more options, so it’s a matter of deciding how many people that would help and just allocating resources on those types of things.
source: http://www.webpronews.com/blogtalk/2007/03/02/gord-interviews-matt-cutts

4. Language / Colloquialisms – There are many words spelled/used differently in different parts of the world. ie Airplane in US Aeroplane in UK. These could be an indicator of what a searcher is looking for in terms of geo-targeting

5. Street Address – This to me is what I would place my money on to become increasingly important. An actual real street address on your site for a geographic region. It would be relatively easy to minimize future Spamming of it by limiting the number of addresses that would be counted ie a max of 10 for example. To me this would be one of the simplest ways to get accurate geo-targeted information.

6. Regional inbound links – The idea here is that links are already being used as a very important determining factor in rankings so it an obvious step to see lots of links from one region suggesting you are of increased relevance to this region. Personally I am not a big believer in this. The logic does not follow. I link to other sites that help my users. These sites are not other location specific sites. The are themed related sites. I cannot see then logic that geo-targeted linking would show much of value.

7. Anchor Text – Including your region/location in your anchor text seems to me to be very helpful in geo-targeting. ie anchor texts with “Seattle Plumber” are screaming out to say they are relevant to Seattle. This is likely to be very important in Geo-targeting.

8. Title – Having you targeted location in your title is probably a very strong way of telling Google which location you are targeting.

9. Language (meta tag) – About as useful as the other meta tags in most likelihood. For all those people out there that are fans of “If all other things are equal” and “every little bit helps” than this one is for you….

10. User behavior - The new factor that is now being suggested is User behavior . Is it possible that Google is now using geo-targeted bounce rates to reorder SERPs for Geo-targeted requests?
Can the same basic assumptions that are implied for user behavior data be applied on the localized level?
It is now accepted that Google has some way of reordering SERPs in relation to QDF (Query Deserves Freshness) ie a search for George Bush in Europe will return mainly articles on his most recent trip rather than older trips from years ago. These types of things must to some degree be decided by user behavior. I would speculate that if a particular Joe Browner suddenly become famous than his personal webpage would start improving in the SERPs for a search of ‘Joe Browner’. The logic being if his page was ranked #12 but the vast majority of people searching that term were clicking on his listing than Google would start to push his listing up. (A test conducted on this forum a while ago supported this assumption) http://forums.seochat.com/google-optimization-7/experiment-to-test-user-behavior-please-participate-135873.html
There have been a few people that have been speculating that the recent increased fluctuations on Google are the result of testing of a new geo-targeting filter. The basis of the argument being put forward is that many large sites that have very large amounts of link juice are coming up in searches where the searcher is actually after a more geo-targeted piece of information. This means the large sites are experiencing high bounce rates for those particular search term and are as a result seeing their SERPs for those terms drop.
Or alternatively there could be a specific algorithm change that is increasing the weighting of the earlier mentioned geo-targeting factors in their level of importance. Thus when a search query is entered either the IP of the searcher or the specific geographic query of the search are being given a greater weighting in ordering search results. Google may be trying to match better the searcher with location specific data.
Or there is a combination of the above two views happening.
Referring back to my opening example of the plumber I would question that Google really wants to go to this level. There is no real need. Searchers are much more intelligent in there searches than just typing in ‘plumber’ and expecting to get localized results. Searchers are more likely to type ‘plumbers in Seattle” etc. I can see why Google would then not want New York or Hong Kong plumbers appearing in the listings for this query.
Does this mean the death of links?… No… If anything it could make links more valuable. Links will remain the basis of ranking for the foreseeable future. The are 10s of millions of pages that are available when a searcher enters a query. Google needs to bring these down to a few. If geo-targeting is going to become increasingly important than the level of competition for non-global search queries may soon be a whole lot less competitive.… If a site has sufficient link juice and the correct geo-targeting feature winning a niche market could become much easier. This change to google may be swinging the search engine back in favor of smaller players again.
The user behavior data than will mostly only play a role on the first two pages I would imagine. ie geo-specific information and links will determine the base set of SERPs but user behavior will have the power to override the LJ data and re-order rankings. User behavior will only move SERPs if the user behavior data is strongly suggesting SERPs should be reordered I would speculate.

7 Geo Targeting SEO Tips
If you aren’t familiar with the term Geo Targeting, it’s the method used by search engines to determine where you’re searching from, so they can provide you with (what they think) are the best search results or ads based on your location (ie. country, region/state, city, post/zip code etc.)

How do they do this?
By looking at a number of factors, such as:

• Country-specific domain name - eg. .com or .com.au or .co.uk etc. etc.
• Where your site is hosted - be careful with this as a lot of hosting providers may have their offices in one country, but use servers and equipment based overseas
• Language used in your website content - even things like UK English vs. US English can make a difference due to spelling and colloquialisms
• Inbound Links to your site - are they mainly from other Australian websites, US sites, UK sites etc.
• Listing of your address / location / phone number on your website
• Location of people who look at your site - if your site has more traffic from Australian visitors it is likely to rank better in Google.com.au than it would in Google.com

7 Simple Geo Targeting Tips for Your Site

Knowing the above information makes it a lot easier to perform a Geo Targeting audit on your site. Here are the things I would do:

1. If you run an Australian website and your main customers / clients are other Australians, spend the few extra dollars and buy a .com.au domain name. If you’re targeting clients in the UK, buy a .co.uk. etc. etc.

2. Apply the same logic (as above) to the web hosting - spend a few extra dollars to have your website hosted in the country that you are targeting.
Be sure to check that your hosting provider uses equipment based in your country too. If you still aren’t certain you can check their IP’s using SEOmoz’s IP Location Tool.

3. Take the time to check your spelling and use the type of wording your clients will understand and are familiar with.
For example the term swimwear, swimsuit, beachwear, cozzies, bathers and togs all mean the same thing but people in Queensland, Australia (where I’m from) rarely use the term bathers or cozzies - we wear ‘togs’.

4. An inbound link is like a personal referral or testimonial for your website. Having links from other relevant local sites will be far more valuable with Geo Targeting than having lots of inbound links from overseas sites.

5. Submit your site to local business and local search directories - this can often be one of the easiest methods of attracting local links and local traffic.
As a rule-of-thumb, just make sure the directory presents well and that you are comfortable being listed amongst the other sites that are in the directory. If you think the directory isn’t great quality, you’re probably right and it should be avoided.

6. Mention your address, location and contact details in the footer of each page - this is one of the easiest things to do which can help tell your clients and the search engines that you are a local business.
The only time this doesn’t really help is if you have offices in multiple locations. Mentioning a dozen countries / cities in the footer won’t do much for your local profile in each of those places. If this is the case you should build separate sites (or at the very least separate pages) for each location.

7. Build your brand locally as you will usually rank well for your business name before you’ll start ranking for more competitive terms.

Ensure you promote your site through off-line advertising methods, which can be as simple as including your website on your business cards, letterheads and other corporate stationary.

This will help you gain local search traffic and as mentioned above, if your site has more traffic from Australian visitors it is likely to rank better in Google.com.au than it would in Google.com.
I know that implementing all the above suggestions may not be possible - so don’t stress if you can only do 3 or 4 of the things in the list.
Every little bit helps.

Research indicates that customers found that those campaigns optimized with GEO-targeting results in mind are more successful from the SEO point of view.
SEO, the acronym of Search Engine Optimization, is the process and techniques that generate quality web traffic from search engines. Web traffic, in natural, has no physical boundary. A gift or an auction website may get visitors from Boston, London, Paris or Hong Kong. Visitors around the world not only use different languages, but also have different tastes for layout, navigation and styles. Besides the general web design and SEO principles that have proven to work well in bringing search traffic, a few tips for GEO-targeting SEO will increase the chance of success for businesses that promote their businesses online across regions of different culture background.

1. GEO-targeting Design
Websites targeting multiple GEO regions may have a few versions of the site. And each version targets one particular language. For the same version, the page may be configured according to the location automatically. It’s a common practice to use IP address to identify the geo region of a visitor. For design of each version, make sure to work closely with the designers who really know about that market. The design of the website should suit the style and taste of the local users. A website targeting US market has much better chance of success if a Boston web design company is involved, instead of a web design firm from India. Geo-targeting depends on the user's settings. As an example, an English web site may display different versions according to the user's location, whether Canada, Australia or the United Kingdom, since Geo-targeting identifies the user's keyword settings, language and location.

2. GEO-targeting Promotion
All major search engines serve the search results based on both what users are looking for (the quires) and where they come from (location). In fact, major search engines Google, Yahoo Search!, and Microsoft’s Live search all have a different version of the main search engine for either major language or a country. A searcher from UK will see the different search results than a searcher from Australia even though they use the same search engine and search for the same term. Search engines rank pages according to what kind of links a site is pointed and where the links are from. If a website site gets most of links from UK, the site will rank well when UK users look for information in a search engine. If you’re not located in the GEO market you target, work with a local SEO firm is productive and rewarding. A Boston internet marketing company that really knows about Boston SEO will do a much better job for acquiring links from either US sites or Boston local websites.

3. GEO-targeting Analysis
GEO-targeting SEO doesn’t end at SEO-targeting promotion. To fully understand visitor behaviors of each GEO market, try using geographic Meta data for accurate results. Several Boston Internet marketing companies have used Web analytic software and IP databases that provide a range of locations for specific requirement when a version of a web site or advertisements need to reach only a specific city within the states.