To be 100% legal on this you should not be ripping data from anywhere that does not specifically state that you can re-use the information commercially. The data you are looking for is expensive to put together, if done well, and even then there are commercial products that struggle to get the depth that you'll probably want.
The Postal Address File (Royal Mail) is an example, it is expensive yet still does not get down to all of the localities that you probably want. That can be excused as they are dealing with postal addresses, so localities are not important, but their data forms the backbone of many other products.
I work with this type of data all of the time and can say it's a nightmare and you have to accept the limitations of available datasets (otherwise you'll never get a "perfect" dataset).
There are many further issues that complicate the matter (e.g. Traditional County names versus Unitary Authority names - some people get offended by the use of one or another). Expect to get complaints about your geo data from pedants even if you take extreme care, hence don't get down if you get people complaining.
I've found that the free data available is pretty poor for what you want to do, many times the precision is not high enough (e.g. 1KM resolution is no good for many areas such as cities with many recognised geo indicators). There's also data which is plain wrong, add to this the fact that you don't get population indicators (hence making it difficult to figure out which area is the most popular if several share the same name) and you've got a real issue.
I'm sure that Google will have invested quite a bit in getting to where they are (I know we have, and it's taken years to get to a stage where we're happy with our data).
The issue you need to consider is how much do you want to spend on a dataset, you'll find two extreme of options. Do it for very little and you'll have to expect lots of compromises, pay a lot and expect less problems but be prepared to be tied into a contract that has you paying for continued use of the data.
If I was in your position (assuming you are using the data for a UK Business Directory, given your domain request) I'd be wary of spending a lot as you'll probably find it much more difficult (than a few years ago) to get a good amount of traffic to justify the spend (it can be done but Google is putting extreme pressure of the Local Search market so you need to have something special and be lucky).
I might be able to help, but as a competitor you may not want to do business with me. I'm not going to sell licences to our data but I do know how to put together a decent set of data that will not incur any ongoing licensing fees (as it's derived from several sources of free data). There would be costs involved in creating this dataset, PM me if you want to know more.
