When your program is executing within the scope of a procedure, the Local window automatically displays the variables local to that procedure (stack variables). This includes arguments declared in PROC directives and variables explicitly declared as LOCAL within the procedure.
Note that variables you create on the stack are not displayed in the Local window, since CodeView is aware only of the assembler-created stack. You can display user-defined stack variables in the Watch window by specifying their address in segment:offset form.