I'm in Venice. That's Italy. Google knows I'm in Italy - it redirects my searches and YouTube to italy. It's not that surprising I'm getting Italian ads.
I'm also getting Italian ads via Google Reader. This screen grab shows the ads currently running on TechCrunch.
This is pretty naff though. I mean; Google must know I'm not interested in Italian ads while I'm in Reader. Google knows that all my RSS feeds are English language. I'm logged into Google when I'm on Google Reader and Google knows I'm from the UK.
Sure. There might be privacy concerns (I'm not one of those people who cry privacy foul at the drop of a penny though) but at the very least Google should have enough data to know to run my default geographic option and not base the decision off my current location.