Regions are the main geographic control in your ad. Different regions have different costs because competition for impressions varies by country.
The options
At setup you pick from four region groups. The first three (cheap, balanced, premium) are checkboxes you can combine in any mix; local is its own thing and can't be combined.
The three tiers are disjoint (no country sits in more than one), so combining them really does broaden your audience rather than double up the same markets.
What's selected by default
New ads start with premium + balanced ticked. That's the combination most ads run with: it covers high-value markets and a wide tail. You can untick either, add cheap, or swap to local, but you need at least one region picked.
How to pick
Depends on what you're after. Building reach cheaply? Add cheap, or stick with balanced on its own. Trying to land paying listeners in the US, UK, or Europe? Premium is usually worth the extra cost. Most ads do well on the default combo.