From the Twitter Blog:

We’re gearing up to launch a new feature which makes Twitter truly location-aware. A new API will allow developers to add latitude and longitude to any tweet. Folks will need to activate this new feature by choice because it will be off by default and the exact location data won’t be stored for an extended period of time. However, if people do opt-in to sharing location on a tweet-by-tweet basis, compelling context will be added to each burst of information.

This, along with their mention of the ability to pull messages based on geographic scope, will open up a lot of possibilities. News reporting is one of the biggest ones, but events and even finding people in your neighborhood are obvious extensions.