Unless you have plans and budget for world domination, your AdWords pay-per-click advertising shouldn't be seen by everyone on the planet. It's much more strategic to focus you're advertising on counties, cities, or even city blocks that your customers are in. This is where 'geotargeting' comes in.
Geotargeting, or Local PPC, lets you target your online ads to appear only to customers in a certain location. This way you won't squander your ad budget on wasted clicks from people who are outside your target area, and you'll increase the chances that the people clicking on your ads are actually eligible to receive your products and services.
In short, geotargeting is essential if you want to make the most efficient use of your limited advertising budget or your money is spent only on customers in your specific area.