When an AirTag is outside the Bluetooth range (~30-40') of your iPhone, it relies on the Apple Find My network which consists of millions of other iPhones. If any of these are within range of the tag, it will pick up the tag's Bluetooth signal which contains the tag's unique ID. The phone will then relay this ID, along with the phone's GPS location to the Apple's servers over an Internet connection. This is where you would see that "location" with the Find My app on your iPhone.
So, in this case, it may be that no other iPhone was nearby.