We propose a novel Bayesian registration formulation in which image location is represented as a latent random variable. Location is marginalized to determine the maximum a priori (MAP) transform between images, which results in registration that is more robust than the alternatives of omitting locality (i.e. global registration) or jointly maximizing locality and transform (i.e. iconic registration). A mathematical link is established between the Bayesian registration formulation and the mutual information (MI) similarity measure. This leads to a novel technique for selecting informative image regions for registration, based on the MI of image intensity and spatial location. Experimental results demonstrate the effectiveness of the marginalization formulation and the MI-based region selection technique for ultrasound (US) to magnetic resonance (MR) registration in an image-guided neurosurgical application.