It appears that Google grabs location data wherever it can find it. I few weeks ago, I needed to figure out a driving distance and ended up telling Google Maps that my business address was in a small town about 2000km from my home. Viola -- Google News now thinks I live there.
I don't actually care all that much. I never expected any privacy on the Web. But I do think Google's behavior is kind of rude. Sort of like hanging out on your front porch and observing the neighbors with binoculars.