The Location field for a discovered CI is populated by the Location field of the Discovery Schedule that triggered the discovery of that CI. This is done by the DiscoverySensor script, which gets the location ID from the Discovery Schedule and passes it to the Shazzam probe, which then updates the cidata with the location information. The Location field for a parent CI Type, a Port Probe, or a Discovery Dashboard report does not affect the Location field for a discovered CI.
References: Discovery - How Location field is set for a CI, How to pass discovery schedule fields to a CI record via discovery

The Extension section in a horizontal pattern is executed after the Identification sections have completed and the CI has been identified. The Extension section allows adding additional attributes or relationships to the CI, or launching other patterns for further discovery12.
References:
* 1: ITOM: Extending Discovery/Service Mapping Patterns - GlideFast ServiceNow
* 2: Horizontal Pattern probe - Product Documentation: San Diego - ServiceNow