While Google's web crawlers always scan thousands of sources throughout the world, they are now parsing the stories, not just by city or zip code. "We're not simply looking at the byline or the source, but instead we analyze every word in every story to understand what location the news is about and where the source is located," says a Google news release this morning.
So, give it a try next time you're searching a local news story. Be an informed consumer and check your usual sources such as Yahoo news, CNN, WGN or the Chicago newspapers, but then do the same search at Google and see if you get different results. Visit Google News and scroll down to the put your zip code in the Local News box.