It's fine as long as you're willing to accept that it's going to be wrong an unknown amount of the time.

Unkown, but very probably within a certain range whose boundaries are known.

In my case it gets country and city but misses completely the ZIP and area, as did all similar services tried so far. If someone threw a non nuclear missile to those coordinates I would probably just hear a distant bang.

I'm curious to know if other people noticed the same level of accuracy.

IP Geolocation might never be the silver bullet for determining user location. Like I've mentioned before if it can't pin you exactly it'll give your co-ordinates as being at the center of the population. Use it where you're okay with having a general idea of your user's location or as a fallback where other means of geolocation are not available eg. via browser, or GPS via mobile apps

Indeed. Certainly most useful for getting a ballpark idea of where, in general, your users are located. I would guess anything that really depends on knowing an individual user's location oughta use something more specific. But you could, say, put certain countries or languages as the default of a drop-down based on IP and be right and bunch of the time, while still allowing the user to make a different choice easily.

Got mine pretty close.