Why is it necessary to add location with keywords?

Selected answers from the Dumb SEO Questions Facebook & G+ community.

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  Jogesh Narula: Don't know either I'm dumb or my question?? But here it is-
  
  Why it is necessary to add location with the keywords? If so, then it means we are indirectly forcing Google to treat our location as a keyword. Why Google doesn't show any local organic result for a generic query that doesn't have location with it. Whereas it shows local listing results for the same query without adding any location with it. We all know that Google tracks the IP location and shows local listing results on that basis, but why it doesn't show the same results for organic part. Is Google so dumb that it can't show the organic results by tracking user's IP address.
  
  So my question is- Why Google doesn't show the local results for both listing and organic part for a generic search term that doesn't have any location with that.
  
  Also, I want to know the way that Google uses to show the local and organic results for a generic query. All answers are welcome.
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  Raman Mehrotra: Hi it's a good thing to have location added to a keyword specially for a bricks mortar business with 1 location, I hate to see results for a business that is located outside search location eg if the a spa is located in sydney CBD users should only see Sydney CBD results not north Sydney or east Sydney which is 7km away from Sydney CBD, this gives users what they are looking !
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  Raman Mehrotra: Google does show results without adding a location if u are physically located in the same location and if they website specifies their correct location, it is recommended that google+ and places and website to have exact same address
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  Jogesh Narula: +Raman Mehrotra I appreciate your response. But that's not my concern... I just want to know why Google doesn't show the local organic results for a generic keyword. If we talk about your example- suppose I'm searching for "spa center" from my location. Then Google won't show me local organic results, the results will be global (excluding local listing results). Why Google itself doesn't recognize my location when it comes to organic results?