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They have an option to eliminate clicks from continents you do not want clicks from. However, there is a disclaimer stating that there is no guarantee that it will work. Go figure.
There is no technology that can be created today that does a perfect (or even nearly perfect) job of identifying a click, pageview, etc. by country. This is because the Internet architecture does not supply such a facility. More specifically, IP addresses are registered to organizations that can place their equipment (and thus support usage) from anywhere in the world. Other information, such as language tags, can be easily faked.
At least Y! is being honest about this, allowing advertisers to take appropriate precautions.
actually there are very good databases that are above 95% detecting correct country based on IP, there are even good databases that'll do a 80% or better job of detecting to the city level.
Even if this is true (I have never seen a formal study -- just claims by the creators of said databases), the traffic that is offered to any particular geotargeting database-powered site may not all fall within the 95% correct level. Another consideration is that these databases are not synchronized with transfers of registration of ISPs, establishment of VPNs, etc. And even if the IP address is somehow "at" the location in question, the entity making the HTTP request could be anywhere (which is what really matters).