The basic difference is that, when you declare $foo = 3; and then
you go into a block or sub and say local $foo = 5; the value in $foo
inside the blocks or sub is 5, but outside is 3 here is some code:

#!/usr/bin/perl -w
#didn't use strict, to make the example clearer.

$foo = 3;     #default value of $foo

{    

local $foo = 5;    #now the value of $foo is 5 while inside the braces

print "$foo\n";    # prints 5.
}

print "$foo\n";    # prints 3.
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With my is a bit different code examples:

#!/usr/bin/perl -w
use strict;    #<- very important.

my $foo = 3;  # $foo has a value of 3, and is seen by the compiler.

{

my $bar = 5;  # $ bar life is limited to the block.
print "$bar\n"; # you get 5.
print "$foo\n";    # you get 3.

}
print "$bar\n"; # <- compiler gives error.$bar does not exsist (kind o
+f).
print "$foo\n";    # you get 3.
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I hope this clear, things up a bit, and i hope i'm not completely wrong
if i am i'm sure the other monks, will point it out.
monk

Update:

s/compiler/interpreter/ig;
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monk