That's not an initialization - that's keeping the FILE I'm working with from affecting any other FILE filehandles in the program. For example:

use Fatal qw( open ); # Because I'm lazy

open FILE, "one";
print scalar(<FILE>);
{
   local *FILE;
   open FILE, "two";
   print <FILE>;
   close FILE;
}
print <FILE>;
close FILE;
[download]

That will print out the first line of one, then all of two, and then the rest of one.

Note: A lot more explanation of this same usage can be found by checking out local.

His Royal Cheeziness