The scope of the variable is essentially its area of influence and defines where it will be recognised and where it can be referenced. A variable can either be local or global.
A global variable is accessible across all your timelines (movie clips) and is best used to hold information that will be required by a number of different parts of your movie. This information will usually be more long term in its nature.
Local variables are best used to hold short term information or information specific to a particular function, for example, a counter in a loop. They are also only relevant within the block of code it is specified in.
Correctly scoping your variable will prevent the occurance of name collisions. These collisions happen where two variables with the same name are created within the same scope and result in errors at run-time. A local variables will also enable you to create self-contained functions that operate independantly of the rest of your movie - more on this later.
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