There are two ways to do geo-targeting in Google AdWords. You can tag your ads with keyword-specific place names or you can do what is called IP targeting.
When you add place names to your ad group keywords you are simply adding the names of the places you want to geo-target. For example, if you sell hardware and tools in Waco, Texas then you would use the keywords “hardware” and “waco texas” for your geo-targeting. But the downside to that is your title and description are taken up with keyword text, which reduces how much you can use for other text that helps you sell.
To get around that you can use IP Targeting. Just set your campaign settings to target a specific geographic area and when you do that you don’t have to use place names in your keyword list. Instead, just target your niche keywords and the ads will be shown to the geographic market that you are targeting.