Local login is when you log in via the form built into NodeBB. This is as opposed to SSO login or some other form of external login.
I believe the local login restriction will only apply if there are other login options available.
@kowlin Hi is this still accurate? There seems to only be three permission categories for Guest Users, all of which I have unchecked, but they can still see the forum categories. The Categories section of the Admin settings doesn't display anything related to Access Control or a Permissions Tab. I'm am using the NodeBB hosted version of NodeBB.