Yeah, I was blown away by this as well. I'm guessing the ip address is enough. Google Chrome pinpointed my location down to the apartment block. Kind of scary, actually.
That's not the whole story. I'm based in Copenhagen but for some reason my IP belongs to a Swedish batch, so I'm constantly being served Swedish ads instead of Danish ones. This service got my location right to within 100 meters. Also, I have a 3G wireless connection that plugs into my laptop, so that I can take it anywhere. There's noway that an IP address can convey my exact location.
Same thing with me. I'm in Amsterdam, and whenever I turn AdBlock off to experience the web it its full glory (rarely), all the IP-based targeted ads think I'm in weird places (generally still in Holland, occasionally in Germany).
The center of the circle on the map was about 4 meters to the left of where I am sitting on the couch, and the circle encompasses my block and nothing more.
Interesting... its possible though that the ip mapping data that google uses is different\more accurate from the ones used by ad delivery companies. My notebook was on my local wireless network unconnected to anything else and it found my location. I can't think of any way its doing that other than ip address. And even with a 3G wireless, Chrome\Firefox almost certainly doesn't have access to your cell tower location information, right?
