"People You May Know is based on a variety of factors, including mutual friends, work and education information, networks you’re part of, contacts you’ve imported and many other factors,” said the spokesperson by email. “Without additional information from the people involved, we’re not able to explain why one person was recommended as a friend to another."
Facebook is full of shit. Of course they are using locations, why else would I get suggestion to friend the guy that cuts my Mother in Law's yard - he stops by for a check from my wife.