This is probably a topic we’ve covered a dozen times here but it is always nice to have an official video from Matt Cutts on the topic.

Matt said, in an “ideal world” it would be “wonderful” for each ccTLD to have an IP address based in the country of the ccTLD. But Google knows it is expensive and can be confusing to set up and thus says it is not necessary. Google uses the ccTLD component as a “strong indicator” for geo-targeting the domain name and web site. And of course, you can set the geo-target in Webmaster Tools as well.

Here is the video:

Forum discussion at Twitter.