If you don't own the hosting service company, or have employees who do, then it doesn't apply to you.
Being hosted in the US does not make you liable to pay US taxes. I the option you are referring to confuses quite a few people.
Thank you so much guys!! rep for you both! does this allow my site to be targeted for usa/uk still tho? its so very confusing
You can target the US still yes. I am in the UK, my websites are hosted in USA and my target audience for one of them is specifically USA. I am liable for UK taxes and not liable to paying any USA tax. You will still be liable for taxes in your country but Google will not be responsible for ensuring you comply. That is your requirement...
Basically, all your audience/visitors to your website would be able to view the adsense ads on your website. So they can come from any country. Even if they do not come from your country, you do not need to worry about paying US tax because you are not located in the US. If you employ someone there then you would be responsible for tax.