This term would do better being called "where is your target audience". There are some things you need to understand, firstly the internet is huge and growing by the day. The search engine are coping with this expansion by having different directories serving different countries or continents, for example there is Google.com and Google.co.uk. The former serves the US and the later the UK and there are different ones for the rest of the world too. Your website, if you are lucky enough to be listed in the different ones, will have different positions in each.
Google now gives webmasters the choice of which country they wish their target audience to be. Obviously if you choose the entire world then you will have a much bigger job to get a high ranking in the directory.
By default the search engines assume that the TLD's (Top Level Domains) of .com, .org and .net have a geographic target of the entire world and although everyone would like to have a TLD it may not be the best answer if you run a small business in a small town in England.
Similarly the search engines assume that the domains like .co.uk and .org.uk have target audiences in the UK, so if you wish to have loads of visitors from the US then you are unlikely to succeed. If however you host your .co.uk actually in the US then this is a different matter because the search engine will assume you are a British company who is marketing to the US.
If you have the knowledge you can influence but not control these issues using the Geographic Target tools of the major search engines. If you do not then it is becoming more important to follow the rules.
Physically host your website in the country whom you wish to be your primary audience but have a domain name that has the suffixes of your own country. This gives you, by default, the best chances of getting a decent rating in the search engines that are dedicated to that particluar location.
If however your business has branches and websites physically located in other countries then they should have domain names with the suffix of their location that they service. Only Head Office of an international organisation such as this requires a TLD or failing that the suffix of the country of its location.