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Some small business type websites list their geographic areas covered, often crudely listing 30 or 40 towns, and then a big list of postcode areas.
Here's an example for skip hire:
http://nottinghamskip.com/skips-delivered-nottingham-mansfield
Obviously you want to match for people searching:
"skip hire Swadlincote"
Probably this practice did once work. Does it still, or does it get penalised?
As long as you aren't doing anything deceptive you will not be penalized.
However, you will probably not gain much if any benefits from Google. Especially if the page becomes so long Google doesn't parse it all. The only situation where it could be helpful to SEO is if you have a specific brand keyword where you are the definitive #1 result and someone searches for that + a location that is named on the location page.
If you want to have a list like this and get the most out of it from Google. I would suggest making each location name a link to another page with the location in the URL and showing a Google Map of the city or location. Testimonial as @Stephen Ostermill said is a good idea as well. Really anything that allows you to create unique quality content attached to each location will be helpful. Especially if it is enough content to allow you to add a specific page just for that location.
I've seen posts from Google stating that they don't appreciate these list very much and that it is borderline keyword stuffing.
That being said, I would certainly recommend that anybody who creates a website for a company that does home delivery or home service include the names of towns and zip codes on the website. The "massive lists" approach is OK, but probably not going to get you everything you want. The best thing about it is how easy it is to implement.
A much more compelling case would be to collect testimonials happy customers in each town and put them on the website.
Title: Derbyshire Skips Delivered by Notingham Skips -- Testimonials
Joe Public from Cross, DE45 -- We were very happy with the skip that we got during a contruction project for...
John Doe from Glossap, DE55 -- I've used Notingham skip several times...
