Cell stands for a sector covered by a base station...so called because the theoretical area covered by a sector of a base station has a honey combed (cell) shape...a base station may normally have between 1 and 3 sectors...

Location number has nothing to do with the mobile number.  The part in the first few digits of the mobile number is called National Destination Code (NDC)...you are right in that it currently identifies a cellular service provider, in India...soon number portability will start up in India and when this is done (this is already done in US, for instance), you can't tell from the first few digits anymore as to which service provider the number belongs to...but the digits, even in that situation, says which service provider a given subscriber first started services with...

Location number is a convenient way that service providers use to tie up a set of geographically adjoining cells (not cellular phones, to reinforce my clarification above...cells are sectors of base station where we get cellular coverage)...when a person moves from one location area to another, the information of the new location number (geographically, range of adjoining cells) is updated in the service provider's database...then when a call comes in for this user, the same information is used to "page" the subscriber in all cells that are mapped to the given location number.

Location number is unique across all service providers...so the mechanism also works for "paging" during received calls when a subscriber roams out of the home network.

The reason that it is a good idea to have multiple cells tagged to a location number is that without this arrangement, the network will be busy updating the central database with changed cell information of every mobile subscriber and then will have much less resources to connect calls between subscribers.

Paging is also less resource consuming since it is broadcast across cells (in a given location number) and all phones "listen" to this broadcast...only the one that the broadcast is meant for responds to the page and this results in the call connecting/maturing.