Determining the actual physical location of an IP address down to a ZIP code or town is almost impossible unless you use help of government or law enforcement officials.
Location detection about the country of IP address is pretty easy and reliable as IP addresses are mapped officially among countries. If you used the tools on this site, you might have already noticed that.
Some tools use the IP’s registration information while some other tools utilize database of manually verified IP information. (Location information voluntarily shared by web users are collected into IP Geolocation database. Companies usually charge for using these kind of data. One such service is located in the IP Geolocation page. Check the “alternative IP location” service. )
Even though IP Geolocation information may not be pinpoint accurate, it usually puts an internet user in a nearby town or region, which may be good enough for someone who wants to know where the website visitor belongs to.
A real-world example: I had once noticed, from IP Locator info, a blog-commentor from University of Missouri and it took me less than a minute to figure out who that person could be! (I had just one friend in there who could be interested in my personal blog.)