Y’ever notice, when driving home through New Jersey, that there are hardly ANY distance signs for NYC?
It’s like the Jerseyites don’t want to admit that everyone’s just driving through to get to the City.
Well, I hope so, otherwise the tourists in Niceville are gonna be real corn-fused when they see the sign that says, “FT. Walton Beach, 7,000 miles.” 
I used to think the distance was to the city limits. This made me quite confused when I first started driving from my hometown to Houston on a regular basis, and noticed at one point a sign reading “HOUSTON 11” followed 25-50 yards later by a sign reading “NOW ENTERING HOUSTON.” Wha? Did I black out?
As can the city limits. Or the location of the City Hall, or the General Post Office. Furthermore road construction and/or realignment can alter the distances from point outside the city to any chosen marker.
The distances are pretty approximate, so it hardly matters exactly where they are measured to.
The official answer for the USofA can be found in the Federal Manual on Uniform Traffic Control Devices that is “required” by federal law to be followed in all states, although states can stipulate additional requirements or guidelines. The site for the pertinent section (2D.36) of the 1,000-page manual is
http://mutcd.fhwa.dot.gov/HTM/2003r1/part2/part2d2.htm
[bracketed info is mine]
Section 2D.36 Distance Signs (D2 Series)
Standard [required]:
If used, the Distance (D2-1 through D2-3) sign (see Figure 2D-7) shall be a horizontal rectangle of a size appropriate for the required legend, carrying the names of not more than three Cities, towns, junctions, or other traffic generators, and the distance (to the nearest kilometer or mile) to those places.
Guidance [not required]:
The distance shown should be selected on a case-by-case basis by the jurisdiction that owns the road or by statewide policy. A well-defined central area or central business district should be used where one exists. In other cases, the layout of the community should be considered in relation to the highway being signed and the decision based on where it appears that most drivers would feel that they are in the center of the community in question.
[In one of the states where I’ve had some dealings on the matter, the North Carolina Supplement to US MUTCD: Section 2D.36 Distance Signs states:]
“Standard: Distance to a City shall be measured using the most direct route to the center point of the City.”
[Clearly, the “center point of the City” can vary over time if annexations occur. Earlier (and possibly extant) standards in NC state that it is the distance to EITHER the city hall or the post office.]
I think you might be right for colonial times, but in living memory, it’s always been from the GPO at No. 1 Martin Place, Sydney. Maybe it changed with federation in 1901. How old are you again, mate? 
This all raises the issue, as somebody alluded to earlier, of the geographic centre of a city changing over time. In Australia, we can probably get away with this, because our custom is to have the actual place ‘Sydney’ being a relatively tiny area a mile or so along each side, even if general usage of the name refers to the entire metropolitan area, so we can retain the old marker points, even though the geographic (and demographic) centre of the city is likely about fifteen or more miles to the west. I’m not sure how America tackles this. Is Los Angeles, for example, officially just the downtown area, or is it officially the entire metropolis?
It’s officially the area within the city limits of Los Angeles, an area of considerable size. As of the last census, it had about 3.7 million people out of a metropolitan area of some 16 million. This is fairly typical of US cities to have about a quarter or so of their metro area population. There are exceptions, but they are mainly cities which have merged with their suburbs and thus contain all or almost all the metro population.
In contrast, for many large Australian cities, such as Sydney, Perth, Melbourne and Adelaide, the nominal central city contains less than 5 percent of the metro pop. (By my calculations, the percentages are 3.9, 1.1, 2.1, and 1.7 for those cities, respectively.) London (UK) has an even smaller percentage. The city of London is a small area composed mainly of the financial district and has only some 7,000 residents, while Greater London has over 7 million.
Also, the point for measurements to London (as linked to earlier by Rayne Man) is about two miles away from the City.
Thank you for the straight dope. 
A slight tangent:
When driving around England in the fall of '85, my parents and I were annoyed that virtually all of the road signs gave the distance to the next little town along that road, rarely to the next BIG town. So you had to trace your finger along the map to see where your road ended up, and keep a running tally in your mind as to how far away your destination was.
American highway signs regularly give you the distance to the next major city, and I admit I prefer that.
Of the roads I drive regularly enough to know the signs, I can’t think of any main routes that don’t have major towns/cities regularly shown on distance signs. Of course, if you’re in a foreign country, then what might count as the ‘next major city’ may not be relevant, because you’ve never heard of it or have no idea where it is!
Maybe it’s gotten better in the last twenty years. I distinctly remember that, when driving towards London, for instance, we’d see signs for the next eight villages, one after another, but rarely one for London itself.
Heck, the postal system is likely to obfuscate the issue even more. My parents house is listed as being in “Orlando” even though they’re a good 35+ min from Downtown proper, and in fact live quite a bit closer to Winter Park. (IIRC, we’re only a handful of miles away from the northern border of Orange County.)