I live just northwest of Denver, where there are actually 2 Apple stores within about 8 miles of each other (in addition to 3 others further south). Denver has nowhere near as large or dense a population as NY or LA, but the Flatiron Crossing store near me is in an upscale mall near a high tech business park that houses Sun Microsystems and Level(3), among other companies. And the Twenty Ninth Street store, just 8 miles up the road, serves the University of Colorado crowd and the affluent residents of Boulder.
Each location makes sense in terms of the shopping environment, and each serves what Apple seems to consider a favorable demographic. So I can easily see stores just 1 mile apart in places like Palo Alto, etc. I'm actually a little surprised that there aren't two stores even closer to each other somewhere.