The term "local network" refers to the set of computers and devices that can be reached directly from your computer without going through the Internet.
For example, your home router, your network printer, or the intranet of your company are usually on your local network, also called LAN for Local Area Network. In technical terms, this refers to the set of IP addresses defined in [RFC1918](https://tools.ietf.org/html/rfc1918), like IP addresses that start with `192.168`.
But an application that can connect to both resources on the Internet (going through Tor) and resources on the local network (without going through Tor) can deanonymize you.