Location-based blocking can be very useful for a site that gets heavy spam from certain places that never supply legitimate traffic. If the spam is too much to deal with manually and it all comes from Guangzhou, China then you can enter the location "Guangzhou" to block it at the city level. If you have a site of only regional interest and are certain you don't want anyone from China viewing it, you can enter "China" to block the entire country -- but use this carefully, because people from your country may be trying to access your site while on vacation/business in China.
If you've activated the invites system on your switches page, people who are invited by another member are allowed to register despite the IP and location blocks because someone is vouching for them. You may want to send people special invites to help them get around the block if they contact you.
Note that people who are location-banned will get a message saying their IP address has been blocked. The location is calculated from their IP address, so it is an IP-based block.
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