Proximity as a Ranking Factor
Proximity is the physical distance between the person searching – or the location named in the query – and a business location, and it is one of Google's three local ranking factors. Google's own documentation calls this factor "distance", the other two "relevance" and "prominence". "Proximity" is the term the marketing industry uses for it, not the wording found in Google's help pages.
In practice
Unlike relevance and prominence, proximity cannot be optimised directly – although correct address data and, where genuinely justified, an additional location that really is closer can help. It is more important to work consistently on the factors you can influence, such as profile quality and reviews.