Regions Control allows you to create standard regions, such as cities, states, countries, counties, villages, etc. and present the user with a drop down list for the Place Ad process instead of allowing free form text entry, which is difficult to search on.
Furthermore, Regions provides an important ability to filter listings based on selecting a particular region (state, city, whatever) by the user. Listings for a category, search result or the entire classified database will be filtered to that’s user’s chosen location, making their results relevant.
The FAQ has a good document on how to configure regions the right way the first time. Start with this article.