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How does this work? Where are the addresses pulled from?

You can get addresses from Google if you supply the coordinates. I don't know if this is how they do it, but it would be easy.

Google has false positives on addresses all the time. (What you say is true, though, but also goes against their ToS to build up a list like this.)

It says "random". I assume that the valid fields are defined using some syntax or another, and then populated from random generators or lists.