The newest version of Google’s Toolbar has a URL shortener, but also “graduates” My Location from Toolbar labs:
With this new release, we’ve also “graduated” the My Location feature from Toolbar Labs. It’s now available in Toolbar for Internet Explorer (Firefox already has a similar feature built in to the browser). After you authorize Toolbar to detect your location, you can simply search [coffee] and Toolbar will return search results targeted to your location. This is done without associating location information with your Google Account. Thanks to everyone who helped us test it!
As mentioned the newest version of Firefox offers this in the browser. What’s happening is that the toolbar and the browser are triangulating your location via WiFi or cell towers. This is much more precise than IP targeting, with the myriad content and ad localization options this implies.
Here’s a video that discusses My Location in the toolbar:
I’ve discussed how location in the browser holds potential implications for ad targeting many times in the past.