simple question regarding local variables

[Ray Andrews <rayandrews@eastlink.ca>]

I should know this:

Say several functions will use the same set of variables, so you want
some way of auto creating them for each function, *but* they must be
local to each function.

This works:

'test1' is a script:

       #!/usr/bin/zsh
       local variable=howdy
       local anothervariable=whatever

    local foo=FOO
    local bar=BAR
    local baz=BAZ
    # and so on ... I create all my variables in the script.


'test2' is a function that sources 'test1':

    test2 ()
    {
       varis variable
       .  ./test1
       varis variable
    }


('varis' simply prints the name and the value of variables.)

A run:

    $ test2; varis variable
    $variable is: ""
    $variable is: "howdy"
    $variable is: ""


... just as I want, sourcing 'test1' creates local variables in my 
function, but why does it
work?  sourcing I understand to create a child shell, thus how is it 
that after 'test1'
returns, that it's local variables are known to 'test2'?  Exactly as I 
want, '$variable'
evaporates after 'test2' returns, so it's local.  I like it, but I can't 
explain it.