What it is
Maps the server's IP to a physical location using a geolocation database, which associates address ranges with known data centres and ISPs. From the coordinates you also get the country, region, timezone and currency.
Why it matters
Where a site is hosted hints at where its audience or its operator is. It also decides latency, and anything that turns on jurisdiction: data residency rules, sanctions, or whose courts a request would go through. Bear in mind this locates the data centre, not the company.