The latest cause of excitement among Google-watchers (or should that be Google-worshippers?) is a search by location feature, currently in beta.
Personally, I'm quite happy with the location-based results I get by typing the name of the region I'm searching directly after my keyphrase, e.g. Internet Usability Consultants Ireland ;)
Google determines the location of a web page (which is never obvious -- all my websites are hosted in the US, for example, even though I'm in Ireland) through what it calls "signals" about "the geographic nature of a page".
I imagine these signals include IP addresses (often misleading -- as per my own example), geo.location meta tag information (rarely used) and the text on the site (again, a regular Google search will find this text anyway).
For now, the Google location search only handles US addresses, but G-Ws have already speculated that the UK, France and Germany will be next -- simply because these are the only other countries served by Google's partner, MapQuest.