Freetagging with location?
If you are talking about the location module you'll have a couple of barriers with profiles on D7. I think they are working on a fapi compatible version but it is not ready yet. 

There is a D6 module (html5 user geolocation) which may provide a good starting point.

Given a location (lat long) the Google maps API can give you an address. 

You can then just pick the administrative level you like and save that as a tag.