I've had loads of people ask me how I like living in London. (I'm in Blackburn.) Before I moved over here, a LOAD of people asked me all sorts of questions about how I could leave home and move to London. Over here, when people ask where I am from, they always want to know how close it is to California, New York or Florida (and occasionally to Vegas).
I think the majority of people (US and UK.. and the rest of the world) associate what they know about a country as 'the whole country' in a way. You hear about London, Paris, New York, Tokyo etc.. but you don't really hear about the smaller towns in any country.
Don't get me wrong, it is very frustrating to have to keep explaining over and over that you don't live in London, and have to explain just how far Indiana is from the major cities and states in the US, but I don't think people really do it intentionally. I've gotten to where I just start with Indiana references, such as the 500 and the Colts, to distract people so I don't have to explain that I didn't live next door to Mickey Mouse in New York City.