When your browser requests content from a website's server that uses geo-ip techonolgy, it's checked against a database to determine your country, region, city or even latitude/longitude and content is delivered based on your location. When you visit a web portal, for example, and you see your local news or weather appearing - this is geo-IP content delivery in action. This is just one example, but there are ways this can be effectively used on ecommerce websites:
Target By Country
If you have multiple websites targeted at individual countries, you can simply redirect visitors to the appropriate site when they click a link to your .com site or type it in directly into a browser.
Or you can detect when a visitor is from a different country when they land on your .com site and inform them of your nationalized site like Amazon:
Or American Eagle:
If you have only one e-store you may wish to show different visitors different content. For example, the US and Canada have different Thanksgiving dates. You may only offer free shipping in your home country and you don't want to "tease" international customers. Or, you could show international customers pricing in their own currencies:
It's also possible to pre-select registration and checkout forms for exceptional usability:
Target By City
You can take this even further with regional or city targeting. For example, certain cities have their own celebrations:
Mardi Gras in New Orleans:
Or even sports teams:
An electronics retailer could show New Englanders a page "cheer on your Giants with HDTV."
Another good reason to show different content to different cities is the fact that weather and lifestyle can differ from region to region. It may be a winter wonderland in Vermont but does it really make sense to feature snowblowers on your home page to visitors from Florida?
IP Location Service Providers
If you're interested in applying this functionality to your site, there are third-party providers for geo-IP targeting, including: