IP-based Geolocation is mapping of an IP address or MAC address to the real-world geographic location of an Internet connected to a computing device or mobile device. Geolocation involves in mapping IP address to the country, region (city), latitude/longitude, ISP and domain name among other useful things.
Accuracy of geolocation database varies depending on which database you use. For IP-to-country database, some vendors claim to offer 98% to 99% accuracy although typical Ip2Country database accuracy is more like 95%. For IP-to-Region (or City), accracy range anywhere from 50% to 75% if neighboring cities are treated as correct. Considering that there is no official source of IP-to-Region information, 50+% accuracy is pretty good.