Does Shield block IPs by country/geo location?

No, it doesn't.

Geo/country blocking is based on IP addresses and is not entirely accurate. This is the reason on why we don't do IP blocking by geo/country location. 

To understand this better, please read the blog article here.

We use our automated IP manager (Automatic IP Black List system) instead.

This system is a part of the IP Manager module. It tracks bad behavior over a set period of time and as soon as it reaches the threshold, the Shield blocks it.

For more information about Automatic IP Black List system, read the article here.