Lexical variables are scoped to the current block (which may be the entire file and in the sample case) and must be declared using my. local, as you say, tucks away the previous value of something (it need not be a package variable btw) and restores it when the current scope is exited.
I suspect you pretty much already knew that. Maybe the missing piece is that you should generally use my (lexical variables) unless you need the extra behaviour that local provides. local doesn't give the scoping protection that a lexical variable does and it incurs some runtime overhead. Bottom line: if you want a variable that is scoped to the current block use a lexical variable.
True laziness is hard work