Geolocation is the identification of your actual geographic location in the real world using information that your computer or cell phone/mobile phone sometimes unknowingly supplies.
The reason for this practise is - as it always is - money. Because there's money to be made if a company knows what your surfing habits are and how they can couple that knowledge to the place where you live or are at that precise moment in time. These companies can use targeted advertising to offer you free stuff or rebates in a shop near you.
The problem is that your (sense of) privacy is being compromised. You may never have given permission to use your address (or somewhere really close) to any unknown online advertising agency. Geolocation can also be misused by certain types of malware. See this article about AndroidOS.Tapsnake. Plus criminals might use the information to target your house for a burglary. Read an illuminating article here.
How to check
You can check if the geolocation feature works in your browser by simply visiting Google Maps via an affected browser (see next post). Then click on the white circular button above the 'scale' feature on the left. Clicking that button will have Google Maps trying to pinpoint your location. If Google Maps roughly finds where you live, then you might consider disabling that feature. If it doesn't, then disabling the geolocation feature has worked. This procedure won't work in Internet Explorer because that browser doesn't (yet) have geolocation.
Or check this page.