Where are the worlds in relation to each other?

The worlds are definitely not physically connected. Every single lot in TS4 and its immediate surroundings basically exists in its own pocket dimension. However, I think that the OP was referring to where the worlds are located in the scheme of our individual play.

Some of us keep all the worlds local. Some of us choose to play them as if they're all spread out in different parts of the U.S. or the world. It all depends on the player, so there's no right or wrong answer.