Will the location control then only scan what is within the mileage radius from the zip code that is entered?
Yes, the geographic center of the zip code, or GPS coordinates if you enter those instead.
Why would the database need to be entered as a favorite if thats the case? Isn't that the same as entering in a zip code and having it scan all frequencies within that radius since the same things copied to the favorites list already be in the national database loaded into the scanner?
It doesn't. You can scan directly from the database if you choose to do so. The only catch is the database doesn't let you adjust any default settings, like Delay. For example, you have to copy the system to a favorite list if you want to change the default channel delay to 5 seconds.
When traveling, the most practical way to scan is to use a GPS to keep your scanner location up to date, and scan the database. The scanner will automatically turn systems and channels on and off as they go in and out of range.
What I did was copy the entire Michigan MPSCS database into a favorite list that I called Statewide MPSCS and then went through it and removed all of the counties that are outside of mine and left all of the ID tags for the entire system in the list as well as all of the statewide frequencies. I then loaded another favorites list for just my county and then my own created DMR/NXDN frequencies found that are not in the RR database for other entities in my county I want to monitor so when those frequencies show up in the RR database I can remove them from that separate favorite list as a way to control what licenses have been issued that go live. That way, if I don't want to monitor anything on the State level, I can turn it off and only focus on county wide activity.
It is inefficient to scan multiple instances the same trunked system at the same time, and you will miss traffic doing that. State-level and county-level talkgroups are generally in separate Departments. You're better off scanning the entire system (with Location Control active), and using quick keys or department-level Avoids to turn off counties or state-level traffic you don't want to hear. You do not need to set up separate favorite lists.