Typically, the country-code top level domain (ccTLD) is just that — a country code. For instance, example.co.uk has content for the UK, and example.com.au has content for Australia. Usually, registration of these domains is restricted. You have to prove that you are operating the site from the designated country. However, some countries have opened up registration to everyone. And of course, some top level domains, such as .com, are inherently generic.
Google uses the location of a site in its ranking algorithms. A searcher in the UK is more likely to see sites from the UK in results. But for top level domains that aren’t restricted to a particular country, Google uses other signals, such as the location of the server in determining what country a site is most relevant for.
Site owners can specify the target country for these generic top level domains in Google Webmaster Tools (but can’t specify a different target if registration of the TLD is restricted to a specific country). Thanks to Googler Pierre Far for letting everyone know!
This is a great solution, but over time, more countries (such as Columbia, with their ccTLD of .co) have opened up registration. Site owners with these domains have been frustrated that Google hasn’t supported the new generic nature of the TLDs. A .co could end up ranking only in Columbia, even if the site didn’t target users in that country.
Now, Google has expanded the list of ccTLDs that they recognize as generic. So if you have a .co or .io, you can now specify the country that it should be associated with. (and @dotco is pretty happy about that.) As always, if your site is not country-specific, don’t specify a target country. Google’s index now recognizes that the unrestricted ccTLDs shouldn’t be associated specifically with those countries so they won’t be seen as more relevant for those users.
Great news for owners of these types of domains and for searchers.