Suppose I have location feature. In train data set its unique values are 'NewYork', 'Chicago'. But in test set it has 'NewYork', 'Chicago', 'London'. So while creating one hot encoding how to ignore 'London'? In other words, How not to encode the categories that only appear in the test set?

You can use the parameter handle_unknown in one hot encoding.

ohe = OneHotEncoder(handle_unknown=‘ignore’)

This will not show an error and will let execution occur.

See Documentation for more https://scikit-learn.org/stable/modules/generated/sklearn.preprocessing.OneHotEncoder.html