Its easier to rank a site higher on google if the keyword is in the domian name.
Thats why you see alot of carpet-cleaning-crapsville.com etc etc
For example, if you cover manchester, liverpool and newcastle (wow alot of milage!) then its easier to have three websites, one for each area than to have one mega site covering all three areas.
Plus, if the said keyword is also mentioned a few times in the body of the website/alt tags etc then even better. Easier and more natural thing to do on a site dedicated to that city/town.
Tony