That’s the question Shivam asked me when we were discussing something on MSN Messenger. (If you still didn’t understand then let me explain…you will find this search option when you visit Google India.)

I answered him quickly by saying Google might be checking whois information or something but I was not at all sure…

Now on the 2nd thought checking whois information was not a practical thing..so that thing is ruled out…

So now we were thinking of other ways to find sites within India…2nd way was the IP address of the server…but that is again not at all a practical solution…

So after thinking for a while and searching for couple of keywords..finally I managed to find the solution…

It searches within all the sites present in India section of Google Directory 🙂 So if your site is not present in India section of Google directory, it won’t get displayed in search results. it also lists sites whch are .in (because .in domains are for indian sites) and in few cases it also lists the sites which are not in India section of the directory but are hosted in India. The importance to such sites is given much more lesser than the ones present in the directory. I have explained it in bit details in this comment