As the recruiter for a medium-size mobile agency, I definitely would not pass on a great candidate that wasn't local — in fact, we frequently post on local job boards in other cities. However, you have to immediately make it obvious to me that you're a kick-ass candidate. I more likely to bring in a local candidate for an interview (which gives them a bit of a leg up), even if they aren't immediately an obvious great candidate.
That said, it's much easier to network and get in touch with the right people if you're in town.
If you really want to make yourself available, being very upfront that you're willing to cover relocation expenses goes a long way.