It is easy to get confused over what google is doing, since google do not describe exactly how they do things, they also change how they do things on a regular basis, which leaves us outsiders to continually have to second guess what's going on.
If you are in the UK and you type in
www.google.com into your web browser's address box, google usually realises that the visitor is from the UK and thus sends the user to
www.google.co.uk. If you now do a default web search for say clothes, even though you haven't specified 'pages from the UK', google realises that you are in the UK and favours UK based websites in the results. If a clothes website owner has a .com website hosted in Germany (e.g. a 1and1 site), then google will not favour that site in its default web search as much as sites it knows are UK-based.
If the user specifies 'pages in the UK' then google will definitely not return a .com site which is hosted outside of the UK, e.g. try a google 'pages in the UK' search for the 1and1 hosted
www.colinette.com
Some people will always click on 'pages from the UK' when they go to google, even though they dont really need to. Others will click on 'pages from the UK' when they have a specialist search which doesn't return too many UK websites, and they really want a local supplier for cheaper shipping. Others might be using an ISP (e.g. some recent issues with AOL UK users having a US IP address) which may make google think they are not UK-based but US-based, in which case the users might click on 'pages from the UK' just to get relevant local searches.
Google will know if your website is UK-based either by first looking at the domain name (e.g. .uk), or for more generic domains names like .com, google will then see where the site is hosted by performing an IP address lookup.