Possibly it's referring to the fact that the focus can be set within a
particular variable declaration. For example, the function might
contain:

  <xsl:variable name="path">
    <xsl:for-each select="$context/ancestor-or-self::*">
      <xsl:text>/</xsl:text>
      <xsl:value-of select="local-name()" />
    </xsl:for-each>
  </xsl:variable>

Within the <xsl:for-each> the focus would be defined as usual and the
local-name() function can be used without an explicit argument.

--
http://www.pinkjuice.com/