From Diablo Wiki
"Region lock" refers to video games that can only be played in certain areas of the world. Though no final announcement has been made, Blizzard has indicated that Diablo III will not be region locked, and that players anywhere on Earth will be play with anyone else anywhere on Earth. 
Players will have to connect to the local region and create a character on it. For instance, a player in Europe would normally create characters on the European Realm. If that player wanted to play in a game with a friend from North America, he would have to create a new character on a North American Realm, or else his Canadian friend would have to create a character on the European Realm.
Bashiok: You can, but you’d need to log in to the EU region and create a character to begin playing with him, or he’d need to make one in your region. If you’re on your character in SEA and he’s on his in EU you’d be able to talk to each other using your BattleTag or Real ID, but that’s it. You have to be on the same region to play together.
Realms and Transfers
There is no information yet on how many Realms there will be worldwide. Diablo III offered 6: US East, US West, Europe, and Asia 1-3.
It's not known if players will be able to transfer their characters between realms, though Bashiok has said it's unlikely. This is supported in World of Warcraft, for a $20 per character moving fee.
Bashiok: No plans at this time. I would count it among ‘pretty unlikely’ due to the real currency ramifications.
Characters per Realm
While Blizzard initially planned to allow numerous (50 was mentioned early on) characters per account, once they removed skill points, stat points, and added more respec support, the developers lowered the account maximum to ten characters. This was a controversial decision, with some players complaining that ten was far too few. A few probable character types:
- Hardcore and Softcore characters.
- Max level PvP characters.
- Low level dueling PvP characters.
- High level PvM characters for rushing friends.
- Magic Find specialized characters.
- Experimental builds, or simply more than one build of each class.
From even that quick list, it's easy to see how a player could greatly exceed ten characters on their account. Before the region locking info was released, such players assumed they would have to greatly limit their character variety, or else buy multiple copies of Diablo III. (Blizzard may sell additional character slots per account for a fee, but they've made no statement on this yet.)
Happily, with the multiple realms, it seems that players who wish to maintain a large and varied stable of characters can do so, providing that they're willing to spread their characters across multiple realms. Blizzard has not commented on this yet, so it's not confirmed, but it does seem likely. Note that a player would have to start over from scratch when first creating a character on a new Realm; as there is unlikely to be any way to transfer items, gold, or characters between Realms.
Auction House Region Locking
One element of Diablo III that is region locked is the auction house. Players can post or buy items in auction in each region in which they have a character, but characters and items can not be transferred between regions, and the Real Money Auction House account will be tied to each region. So if a player sells items for real money on the European Realm, they could not transfer that money to their US Region account.
This will create numerous complications for players who wish to cash out their Bobby Bucks in a region other than their own, as exchange rates and international transfer fees would likely take a large bite out of their profit.
Full details on how this system will work have not yet been released.
Bashiok: The gold auction house is not global. You can use each region’s gold auction house, but they’re all separate, as the characters in each region are separate. You can only use the currency-based auction house of your home region.
I was under the impression that I would be able to switch my currency from USD to Peso’s whenever I pleased, being an American citizen/resident. But I wouldn’t be able to switch to a Euro AH unless I proved that I “moved” to Europe.
Bashiok: That all sounds right to me. I’m not sure of a process to actually flag your account for another region though, even with proof. It’s possible that could happen but I’m not aware of any intent to support that.
What if you create characters on a different region’s servers? Do those characters have access to your home region’s RMAH, or do those characters simply not have access to any RMAH?
Blizzard's Region Locking Policy
Blizzard has implemented region locking in some of their games, most recently in Starcraft II. In that game, a player must register their game in one region, and thereafter can only play it in that region. It's possible for a player to play in two different regions, for instance in the US and Europe, but he must register two copies of the game, one in each region.
Region locking is not planned in Diablo III, and players can connect to any region, from anywhere in the world, though characters are saved to the region they are created on, and can not be transferred.