In a foreach loop, the loop variable ($o in this case, $_ if none is specified) is a alias to (not a copy of) the current element of the list over which the loop interates. Any changes to the loop variable is reflected back to the list element.

In other words

foreach my $o (@outer) {
    $o .= 'loop';
    print $o, "\n";
}
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is the same as

$outer[0] .= 'loop';
print $outer[0], "\n";
$outer[1] .= 'loop';
print $outer[1], "\n";
$outer[2] .= 'loop';
print $outer[2], "\n";
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Update: Switched to terminology that's more appropriate for Perl, as per Grandfather's recommendations.