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I used the keyword spy to search some of their keywords. They are showing that the company that is running the PPC campain is using very dumb keywords ex. "moscow Flowers".....So I searched it and it came up with our ad. Im sure they will tell me that they will tell me that its because I searched from the city the business is in. The only problem with that is whenever I try some other searches for any random town, our ad does not come up, what in the world is going on here?
Ask the company that is managing the local keyword campaign a little more about how they setup the campaign, and hopefully they'll tell you what they've done. It just sounds like a situation that could use some additional clarification to understand just what is really going on.
Best of luck,