Locations are important to the game because they are important to your characters, just like the Needs and Items are. (It's actually a matter of "It's important, because the rules say it's important", but that's not an answer that's of any use to you.) Locations are places where something either has happened or will happen that's going to have an impact on the story.
The exact details are going to vary from story to story (or Playset to Playset), but the good news is that you and the other players get to determine exactly why a location is important. You get to hammer out the details that would change a constraining Location into a great one.
Like your Needs and Items, Locations need to be evocative and they need to be able to feed into conflict in some way. While you are brainstorming them, the Locations should provide a lot of inspiration about the story and the characters. If the name of the location provided from the Playset doesn't seem helpful, spice it up with details until it is. A good question to ask is "What could go wrong at this location during the game?" and go from there.
For example, something like "Mr. Smith's house" may isn't very interesting at first. But fill in the details about it! Is it a huge mansion? Is it a tiny hovel? Is Mr. Smith making meth in his basement? Is there a shelf of prized glass figurines in the living room that's itching to be smashed? Is there a body under the floorboards, or buried out in the rosebushes?
Ideally, the Location should 'hook' the players into wanting to use it. Keep revising/adding details until everyone wants to be the first to set their scene there.
Frequently visited Locations improve the game by building continuity of the story. Most likely, bad things are going to happen during your scenes. When they do, the Location will be changed to reflect that. Maybe somebody got murdered, so now there's a huge stain on the rug. Maybe a gun went off and there are bullet holes in the front door. Maybe somebody hid something illegal in the couch cushions. Maybe something valuable is missing. In any of these cases, there is now something to use to further build conflict in a later scene.
More subtly, you can vary the tone of the scenes that occur at a given location. Maybe there's a scene in Bob and Connie's bedroom early on that shows how much they love each other. Then there's a scene where they get in a screaming match. Even later on, we might revisit the bedroom as Darla drags Bob in there to take advantage of him after spiking his drink. By using the same location with different tones, you're showing how the characters have changed, or how far they've fallen during the story.
Another thing to note is that if you don't like Locations, you don't need to use them. I've had Locations, Items and Needs that seem really interesting during Set-up get dropped in favor of something else during the actual game. We weren't doing anything wrong, they just weren't as cool as the things we were already doing. It doesn't have to be "Well, the rules say there are Locations so we HAVE to use them", but "This is our toolbox for the game; Which tools do we need this time?"