shazam - 3:54 pm on Sep 22, 2011 (gmt 0)
From my experience both recently and through the years, IP address absolutely matters.
Just a few months ago this was once again proven. I have a few sites where most of my conversions come from Canada. The sites have been hosted in the States for quite a while. I knew what I had to do, but as we all know a person gets busy and there's always an endless source of fires to put out and urgent projects to complete. Well I finally bought a server in Canada and got the sites moved. Within the first two months I saw a drastic shift in traffic and rankings. Now, my US rankings are not so good, but the same keywords are getting nice rankings in google.ca which is exactly what I wanted to happen. No other changes were made to these two sites.
Same story with another site that I have had hosted in the UK for many years. Same with a handful of sites I have in Asia.
Google has data centers all over the world and from my experience they all treat the local results differently. It's pretty much a no brainer in my opinion that if you want to compete in country X, then your better off having your server in country X.
I wish IP address didn't matter so much, it would be nice and convenient, not to mention cheaper, to simply use one host.