Local mods reside on player's computer without any connection to steam workshop. They're persistent in the form and vesion they're on the hard drive. Also they will not get updated automatically when new versions appears.
Local mods are stored in the game folder
There is a strict directory structure in Mashinky's mod to help engine merge all content on startup (or mod load). It is the same structure as in "/media/" directory and all folders are optional in mods.