This isn't a full explanation, but itis the best one I can come up with. You'll have to put up with a bit of history first though.
IP addresses are issued to service providers ib blocks which are supposed to be used for specific geograpic areas. That was OK in the dim and distant past (the 80's and early 90's) when ISPs in the US were largely local to a city or state. In the UK the ISP's usually ignored the geographical stuff associatd with IP addresses and assigned them as needed. Thus on a dial up line you were given a different IP address every time you connected to the net.
Broadband changed that but, again in the UK, the ISPs mostly ignored the geographic bit of the IP addresses. When living in London and using broadband, I was shown as being in Scotland, Wales and the midlands as well as London at various times.
When Google map the country they also pick up and record the SSID which is broadcast by any wireless routers in the streets. They then use the combination of SSID and IP address to show your location when you go into maps.
In the case of mobile phones and tablets, there is also the GPS location available to Google.
Now for the fun bit which may answer your and bhg's queries.
In major cities and towns, Google send their cars around fairly regularly to remap the areas and keep streetview up to date. Out in the sticks (where I am now) vsits by the Google camera cars are less frequent (streetview where I live is from 2009).
For Prudie, if she is out in the sticks, Google may only have the IP address to work with, and that, at least in the UK, can be unreliable. Again, if Prudie is in the countryside, it is quite possible that Google don't have up to date data for your router's location and will be forced to use the IP address to show your location.
For bhg, who I would guess is in a city, the wireless machines will show an accurate location based in the SSID of his router, but his desktop connected direct to the router can only be traced via the IP address, which as I've already noted, can be unreliable.