Russell Allert said
1 year ago: @nurby Hi Angela
I pulled this from Facebook’s official page regarding Ads (you can find it here).
Facebook determines the location of a user based on IP (Internet Protocol) addresses, which can help identify the country or city where a user is physically located. If a user has listed a current address on their profile (timeline), they may see ads targeted to that location, regardless of where they are currently located. Ads are not targeted to a user’s geographic networks or any other information.
I think what FB is saying is that if a person has filled in their address details on their profile then they will see ads targeted to that location, otherwise their location will be determined by their IP Address.
So, if they created their FB profile when they lived in the USA and put their address as New York, USA but are physically in Brisbane, Australia, they would see ads targeted to New York. If they delete that address information then they would see ads targeted where they physically are.
Hope that ramble makes sense! 
Russell