In pre-production location managers are driving day in, day out to various film locations and trying to find that needle in the haystack that offers the director, the right look, the producer, the right price, the DP, the right amount of space, and the sound mixer, the right atmosphere, and so on and so on. On top of finding the location, he or she must be a master schmoozer who can convince a nervous owner to allow dozens of people and equipment into their space and typically for not a lot of money!
Location mangers handle the negotiations and paperwork between the location owners and the production. They also interact with film permit offices, securing all the necessary permits for a film shoot. If the film has special needs, like shutting down a street, the location manager will also handle any necessary police escorts, etc.
In production, location managers set up the location for handling the crew (i.e. parking, bathrooms, etc.) and they are the liaisons between the production and the city and the location owners and their neighbors, who are often annoyed by the needs and effects of a 25- to 100-person crew stomping all over their property. Location managers need a charm (and a petty cash budget to pay off the obstinate neighbor who won't shut off his or her stereo) that smooths over the ruffled feathers of those affected by the film shoot and have the ability to ensure the location is protected from the damage that people and equipment can cause.
Most insurance policies still have a hefty deductible (like $3k) for damage to a location so as a producer, you will want someone managing the locations who shows concern for keeping damage at bay. And the only way to do this effectively is to have a producer and location manager who make the protection of the location a priority.
What I have described above seems like a fairly straightforward job description -- find, secure, and protect locations. It may sound simple but it's not easy. Location managers are usually the first on set and the last to leave (not leaving much time for sleep), and they are constantly dealing with needy, often angry, people and cleaning up after sloppy crew members who toss their garbage all over set each day. Did I mention location managers need to ensure the location is returned in good, clean condition? This includes taking out the trash, etc.
And because location managing is a hard job, there are those out there who will try to make their lives easier when they hit the inevitable obstacles when locking down locations. I have heard stories of unscrupulous location managers forging signatures on location agreements (only to have it revealed on filming day and the production shut down as a result) or telling the production that all the necessary agreements and permits are in place when they really aren't (which really causes problems when you realize you don't have all the agreements for your deliverables when your film is ready to be sold).
My advice is to try to keep copies of all the location agreements and permits on file in the production office prior to filming at that location so you are assured that all the paperwork is in order. You don't want to get caught without the right paperwork on filming day. That will cost you time and money. And once you find that good, reputable location manager, hang on tight and don't let go! They truly are lifesavers!