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For instance, I was told that since I was not from a certain state, my chances of acceptance were suddenly much less than those of a similar student from that other state.
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At Williams -- and every other top school in the northeast -- the applicant pool consists disproportionately of well-qualified students from Massachusetts, Connecticut, New York, New Jersey, and Pennsylvania. They could probably fill the whole freshman class just from those five states alone. But no school wants to do that.
So if a small northeastern school gets hundreds of applications from New York, and only a handful from Idaho or West Virginia, then yes, an Idahoan or West Virginian may be more likely to get in than an equally well-qualified New Yorker. All else being equal, there may be a perceived benefit to adding one Idahoan or one West Virginian to the freshman class, rather than the 89th New Yorker.
Of course, it works both ways. An applicant from Pennsylvania, for example, would likely have a geographic advantage at LACs like Pomona, Grinnell, Colorado College, or Whitman.