Location Control Off means the scanner will always scan the Favorites List, regardless of what location input it receives. (Location input can come from either a change in zip code, a manual location entry or a GPS device feeding location information to the scanner).
Location Control On means the scanner will only scan "stuff" that is in Range of the scanner's location. Just like the above, a scanner's location can be changed by zip code entry, manual location entry via the menu or by use of a GPS device. There is also an Auto Locate feature for certain types of systems, but this isn't a magic bullet and should be used cautiously.