Geographically the locals distinguish between the Bay Area (all counties surrounding the San Francisco Bay), The East Bay, The Peninsula, and the North Bay (from Golden Gate to Benicia). Silicon Valley is a short distance from Redwood City (2/3 down the Peninsula from San Francisco) to Santa Clara 30 miles to the south. This area along the bay and a couple of towns in the next row towards the mountains hold many of the biggest companies in the world: Oracle, Electronic Arts (EA), Facebook, Google, Apple, Hewlett-Packard (HP), and some working towards similar fame. Linkedin, Tesla, WM Ware are examples. Yes, there is still development of computer chips and similar avantgarde technology but most of the production now takes place outside the Valley. Most startups concentrate on software - it requires less investments.
San Jose, the biggest city in the neighborhood with almost 1 mill. inhabitants, touts its Silicon Valley prominence but in Palo Alto they don't really buy into SJ's membership of the club. And if you look at the direction of the morning and evening commutes, there is no doubt that Palo Alto is at the center.
Many other companies draw on the Valley's entrepreneurial spirit and you will find Microsoft, IBM, Ericsson, Siemens, SAP, and many other giants with headquarters in other states or countries on a constant lookout for new companies on the rise and perhaps ready for a takeover. There are many other financially success stories than Google and Facebook, but many were just known to the insiders before they were bought by a bigger corporation. And then there are naturally the many, many other start ups that never make it to their 5 years birthday.
The takeovers are the life blood of the Valley economy. Many entrepreneurs are great at starting a company but don't know anything about running it past a certain level. They may have gotten funding from Venture Capitalists along the way and with that "adult supervision" in the form of a professional Board of Directors, but the bureaucracy that comes with having a bigger corporation - not to mention a listed company - is a turn off for many entrepreneurs. They hand off their baby and get money to start fund their next idea. Note of warning: You better have done your homework before you talk to VCs.
You may see some of the entrepreneurs showcasing their business plans to the VCs if you visit Buck's Cafe in Woodside. It has for many years been an more informal pitching field than visiting the VC offices on Sand Hill Road. Even if you are not interested in start ups and just want a BLT or a stack of pancakes, Buck's is worth a visit. James McNiven, the proprietor, likes collecting things. He supposedly unsuccessfully tried to buy Lenin at one point after the regime change in Russia; in lieu of this prize he has a Russian cosmonaut outfit, John McEnroe's racket - the one broken at a Wimbledon match? - snake skins, a moose, a crocodile, a brass orchestra, a flea circus... do I need to go on?
The Computer History Museum in Mountain View has a huge selection of electronics, some of which made the Valley so famous. If you follow the exhibition in chronological order, you will suddenly be confronted with the machine that was your first introduction to IT. I even recognize the smell. You can also learn how IBM got its break through as purveyor of punch card equipment for organizing the country's census. IBM is over 100 years old and has to the best of my knowledge moved away from punch cards but we still have a census every 10 years.
You can't ignore Stanford University. It is not only prominently placed next to Palo Alto, it also has feed many of the ideas that the Valley has thrived on. Google's founders walk directly in the footsteps of Hewlett and Packard when it comes to finding likeminded collaborators at the university. Many of their professors are very astute members of the start up scene.
It really does take a bit more than tweaking the tax laws to copy this "eco-system".