You can set up any number of shipping zones for your store. A shipping zone is an area which has its own shipping price levels. Countries and state records will be mapped to the appropriate shipping zone later. At the simplest, you might want a 'home' zone for orders in your own country, a 'regional' zone for countries nearby, and a 'rest of world' zone for everywhere else, for example.
If you want to subdivide your own country into various shipping zones, you can do this by having multiple regional 'country' records each mapped to their own shipping zone. So for example, a store in the UK might decide to have three shipping zones within the UK:
United Kingdom - Mainland
United Kingdom - Highlands and Islands
United Kingdom - Northern Ireland
You would then need to have three corresponding 'country' records, each of which is mapped to its appropriate shipping zone.