Vana'diel is controlled by three nations: the Republic of Bastok, the Kingdom of San d'Oria and the Federation of Windurst. Though all three have been allied since defeating the Shadow Lord in the great war 20 years ago, they are still in friendly competition for the land and its resources.
While the nation you pick isn't exactly important, it can enhance your enjoyment of the game as you begin. Each nation has its own distinctive storyline and missions, and a few pieces of exclusive gear available to them.
If you pick a nation that is home to your character's race, you'll be rewarded with a useful magical ring as you start your adventure. This will be quickly chucked, though, so it shouldn't be the basis of your decision, as you won't be able to change nations anytime soon.
The best way to decide? Pick the one that looks coolest to you and enjoy it.