The internet is a global network that despite its assumed unity is highly segmented. National internet service providers can lock out content based on its source, for political or security reasons.
Adding to this modular connectivity of internet "islands" is the ability of major search engines, such as Google, to direct search traffic to specific, local domains and web sites.
It's true that there are ways to overcome this segmented access, such as using VPNs and proxies to access content that has geographical restrictions imposed upon.
What are geo-domains?
Any domain that matches a regional or local name across the globe, such as village, town, city, region, or country, is a geo-domain. Domain investors and entrepreneurs often invest in and manage content built on domains with such geographical references.
Pure geo-domains consist of the exact name of the region in reference, but there's another group of domains that utilizes the geo-domain reference to direct traffic locally, or internationally.
By using the power of geographical suffixes, domain investors and developers can leverage search engine visibility, some times more accurately than the pure geo-domain can do.
A geographical suffix is the location as the last part of a domain. For example, if you operate a widget business located in Miami, the choice of the domain WidgetsMiami.com emphasizes the location, alongside the product or service. Your widgets are thus tagged with a geographical suffix that "directs" Google searches towards that destination.
Keep in mind that Google evaluates such destinations based on their content. If you are using WidgetsMiami.com to talk about Russian vodka then the two are disconnected and the web site and domain rank poorly, or may even be penalized.
The key usage of geographical suffixes in domains is to form a cluster of interconnected web sites that actually provide localized services. As long as your content is accurate, useful, and follows Google guidelines on content and SEO, you should be able to rank handsomely for these localized searches.
A fun disclaimer: Google also drives hyperlocalized traffic to its own choice of destinations.
Google resides on millions of phones, tablets, and other devices using the Android OS, and any searches of the "widgets near me" kind are directed to content providing services within a few mile radius. In essence, Google automatically narrows down the results to fit a smaller circle on the map.
This can break your marketing plans if you use domains with geographical suffixes that are too broad.
The solution would be to narrow down your "widget" business to areas within cities: WidgetsBronx.com, and WidgetsManhattan.com would be two examples of hyperlocal geographical domains, with WidgetsNYC.com being the one to beat.
In a nutshell: Geographical suffixes in domains can drive traffic to your locally-focused business more accurately, feeding your products and services into the Google funnel. Choose your domain names and locations wisely!