A target country is the country where the products included in your data feed are sold and will be shipped. The items uploaded to a selected target country must meet the requirements for the target country you submit to, including the feed specifications and policies. For example, your data feed needs to list the products in the local language, the product landing pages need to be in the local language, and your prices need to be in the currency for the target country.
This is the country of sale in a Shopping campaign.
Google might show your offers to users from a country even if you have excluded this country from your targeting options in AdWords (e.g. using the advanced location option) with the goal to provide a good user experience to this user interested in foreign offers. If you are not targeting a country in AdWords, clicks from that country will be free.