In short, an Area is a set of Locations.
Normally in the Game Engine we are talking about Interactive Locations:
As part of the Story Telling process, you might also use Cut Scene Locations. A Cut Scene Location can include a video, a still shot, or even be included as the background graphic behind the displayed dialogue of a fully written Scene in the script.
The Game Engine can also provide assistance to render a context sensitive Game Map.
A Location should have a Canonical Name, a Display Name (changeable), a written description (may vary based on time of day or other flags), a list of visible objects, a list of visible characters, and a list of Exits (named or directional).
Objects (those which are not flagged as hidden) should be mentioned in the main written description, or in the look/examine text for other objects.