For those of you who don't know, on July 24th Google released it's Pigeon update. According to Search Engine Land (see the article here), on July 24th US webmasters began to witness considerable changes in their local rankings. As of right now we are monitoring our Client's sites and have noticed small incremental changes for our US clients but nothing yet for our Canadian or European Clients. I'm sure that will begin to change over the next month or so.
As of right now this update does not appear to be penalizing any sites however it does appear to be a core change to the local search engine ranking algorithms. This does appear to put more importance on more traditional ranking methods (synonoms, correct spelling, etc.) for websites targeting local niches but that is so far these methods are relatively untested. As of right now though it is nearly impossible for anybody to tell exactly what has changed and what will work to increase local serps. According to search engine land one thing that does appear to be happening is that directory services are beginning to rank alot better (Yelp, YP, etc.). This may make it more valuable for anybody doing local SEO to make sure that you are infact submitting to high PR, do follow and high reputation directories relevant to the categories of your website(s). Still be cautious though because spammy links may still get you in trouble with Google Penguin on some of the less then reputable directories or submitting your website(s) to irrelevant categories. If that happens you may wind up with the nightmare of trying to disavow and remove links which Matt Cutts has specifically said may not even be enough to get you fully de-penalized and even if it does work it may still take you several months (3-12) to get the penalty completely removed.
If you have been negatively effected and need a quick solution, my best recommendation is spend some money on PPC adverts until any sure fire stradegies are discovered.
Just thought I'd give the daniweb community a heads up and please feel free to let me know if you have witnessed anything odd going on with your website(s).