That’s correct. A VPN does nothing at all for phone calls, SMSs etc. A VPN only deals with data that you send and receive on the internet, such as for email, web browsing, instant messaging services, VoIP.
To the more general question of whether VPN hides your location … you need to first answer “from whom?”.
A VPN most definitely hides your location from your peer on the internet e.g. a web server that you connect to. You can easily see that by visiting http://whatismyip.com and looking at the “Location:” information, firstly when you visit that web site without a VPN and secondly when you visit it with a VPN, particularly if you choose a VPN server (endpoint) that is in another country.
(However that experiment probably won’t work quite so well if you are using a cellular service to connect to the internet. In my case, with my phone, I can get three different location answers depending on whether WiFi is off, so it is using the cellular network, or WiFi is on and not using a VPN, or using a VPN.)
If you are accessing the internet via a cellular service then a VPN most definitely does not hide your location from the cell tower, from the operator of the cellular service or from the government.
One way of looking at a VPN service, ignoring all the encryption angle, is that a VPN is like a relay. You are relaying all your internet traffic through the VPN server. That extra step puts extra ‘distance’ between you and the peer on the internet, making it more difficult for the peer to track you down but it certainly doesn’t make it impossible.
A VPN is not used solely to hide or obscure location. A VPN may also reduce the value of the extensive surveillance and logging that goes on over the internet i.e. improves your privacy. A VPN may also bypass any local restrictions (including geoblocking as Kyle mentions above but also any nuisance imposed by your own government).
Of course a VPN service is only as good as the trustworthiness of the operator of the VPN service.