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Locations alone do not server any function, they are just piece of text on the map.
Each map, like utes, comes with locations already defined on it. They are used by modules and scripts so they know where to do things. E.g. where to place people (ambient civilians and vehicles are more likely to appear in cities than in the wilderness). Notice that there is an “open space” location type, which is probably the sort of place that the side-missions system would choose to place an enemy camp. Anyway, what this all means is that if you want to mark other locations on the map, such as if you setPos a city somewhere, you can ensure that other scripts treat it as such.
Not positive about all this…