Your campaigns can target locations by 3 options:

1) Both people in, or show interest in, your targeted locations. With this option, if you are advertising in a location and the user's search query matches that location, then your ad can show even if the user is physically located outside your location.  For the display network, if the page's content includes your location, then the ad can show even if the user is outside of your location.

2) Only people in your targeted location: Your ads should only be displayed to people who are physically within your targeted location. 

3) Only people who show an interest in your targeted location: Your ads will only show to people who are actively looking for information in your location.  If their search query does not specify a location, then their location will be used for targeting.

It is common for a hotel to want to reach users searching for their targeted location (travelers) or a local plumber to only want to reach people in their targeted location as they don't travel outside of that region.

If there's a large difference in your metrics by location type, then we'll show an alert on the dashboard (Audit Alerts / Campaigns) that you want to examine this data:

If you click on the alert, you'll see the list of the relevant campaigns. 

Click the View button in the User location performance and setting column to open and change your settings from the following screen: 

On this screen, you can also see the difference in your metrics by location option, which may be useful for making a decision. Please note that the option for Both people in, or show interest in, your targeted locations, is the 'total' as that's the combined stats for each individual option. You can then change your options from the same screen by choosing the option and then clicking Save Changes.