Let's say you've geotargeted your Google AdWords ad for Florida. You'd be alarmed if you saw that the ad was being run in Oslo, Norway, wouldn't you?
I suppose I would be.
Is this a problem with Google? Well, in a way, it could be. AdWordsPro Sarah explains what could be happening if the geotargeting seems to be off as "query parsing [which] helps people who reside outside your targeted region but are interested in your product/service in your targeted region." To illustrate this phenomenon, she says that if you're targeting an ad with the keywords "buy surfboard" to Florida, and a guy from Oslo searches "buy surfboard florida," query parsing would come into play. After all, they're looking to find out ads specific to another region, and they can't do that with geotargeting blocking out Oslo from this specific query.
Forum discussion continues at Google Groups.