Install locations are folders that the itch app installs games to. The initial install location is in a folder your user has write access to without requiring administrator rights.
That's why games aren't installed to
Program Files on Windows. As a rule, the app can be installed and used without ever asking for Administrator privileges, except for sandbox setup or third-party installers.
Adding another install location
Click the "Manage install locations" button in the Preferences window, then click the "Add install location" button:
Whenever you install a game in the app, it will ask you where to install it.
(By default, it will pick the location you last installed to)