My Stack Overflow profile lists my location as: Saratoga, CA. The Careers 2.0 block on the main Stack Overflow questions page (correctly) lists a couple of jobs in my area.
But at the bottom of the Careers 2.0 block is a link: "More jobs near Saratoga". When I click on that, it takes me to a page listing jobs near Saratoga, AR (resulting in zero jobs—so sad).
The "Where" box in that page only lists "Saratoga", so I'm guessing that's where it gets lost. If I change the text in the Where box to "Saratoga, CA", then a bunch of local jobs show up (as expected).