The pizza example would be more like you're driving home from work at 5:30pm on Wednesday on your typical route which passes by the pizza shop. Google Now knows that it's dinner time and that you've purchased from that pizza place before on a Wednesday for dinner. Thus, it "alerts" you of a special deal if there is one.
Yes that would probably work. I think the pieces of the signal in decreasing importance are: you purchase from a business frequently, the current time is close to the average time at which you purchase from that business, you're physically close to the business.
I wonder if physical proximity really matters relative to the other two pieces? Pizza places can deliver so even if you're across town the ad could still have value. Corner case is when you're on travel and physical distance is very large.
Advertising based entirely on physical proximity could be almost useless. Imagine driving through downtown at 11 PM on a Friday night. As you pass the dentist you're prompted with "50% off your next teeth cleaning!". As you pass the park you're prompted with "Sunday Parade at the Park!". As you pass the liquor store you're prompted with "Beer sale!". Finally something useful. However by this point I would probably be ignoring the ads.