This is mostly just basic IP geolocation. I work for Ipregistry (ipregistry.co), and this kind of lookup is something we provide: country, region, city, ASN, hosting provider, VPN usage and similar signals. Any service that sees your IP can request that information in a single query.
ChatGPT receives your IP when you connect. The model itself does not know your location, but the system around it can add location context before the model answers. Many products do this because it helps with weather, time zone handling or local recommendations.
Accuracy depends on your network setup. VPNs, mobile networks and corporate proxies can make the location drift quite a bit, but at a general level it is often good enough to shape responses.
The more important part is transparency. Inferring location from an IP is normal, but it should be clear to users when that information is being used.