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I understand that the more items with a happiness modifier I build, the more happiness is generated, e.g. the Tree of Ale, Beds and Statues etc.

Can I build improvements wherever I want or is it based on line of sight?

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Just make sure they have enough booze and decent bedrooms an-- oh, wait. Not actually Dwarf Fortress... – Shadur Oct 24 '12 at 12:31
up vote 0 down vote accepted

It appears to have an affect anywhere on the map. Every happiness item you build increases their happiness rate. It also seems that once the happiness rate is on the positive side, their happiness will simply continue to climb until it reaches 100%.

I've found the wall and floor coverings for your main base are enough to keep them at 100% happiness.

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