It will broadcast to the network to find services listening on TCP 1433, which is generally your SQL Server instance, or the SQL Browser Service if you have more than one instance running on the machine. It's code that is part of Microsoft SMO, so we're not in control of the network traffic; we just call a method, and it enumerates the servers for us. So, some things that can kill the process of broadcasting to the network are:
1) SQL Server Browse services not running, so therefore, won't respond
2) Firewalls (on your own machine, too) that block the broadcast requests
3) Servers not on your local network (IP subnet) will never be found since an IP broadcast doesn't get routed