From this Google Webmaster Central blog entry:

Does location of server matter? I use a .com domain but my content is for customers in the UK.

In our understanding of web content, Google considers both the IP address and the top-level domain (e.g. .com, .co.uk). Because we attempt to serve geographically relevant content, we factor domains that have a regional significance. For example, “.co.uk ” domains are likely very relevant for user queries originating from the UK. In the absence of a significant top-level domain, we often use the web server’s IP address as an added hint in our understanding of content.

That pretty much sums up why you would want to host a website on a server inside the country where its primary audiences are, especially when obtaining an appropriate ccTLD is less than trivial.

“So, DreamHost has started their own Virtual Private Server hosting business.”

“You kidding?!”

“Yes, it is true!”

From DreamHost Blog’s latest entry, What a CON!, where Josh Jones has again done what he does best — humiliating the whole HostingCon, companies such as Lunarpages, HostGator, Tier 1 Research and OpenHosting. Very enjoyable read for an otherwise boring Friday afternoon.