In Craft (Solo) 3.2.10, In Settings > Assets > Asset Settings, there's a field called "Temp Uploads Location". I do see images in mine that I intended to go into the system, but not into there.
What is that feature for?
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That setting is basically saying, "where do you want your Assets to be stored while the related Entry is still being processed?"
Take a practical example... You are editing an Entry, and want to upload an Asset to a specific field in your entry. Click-click-click, you've added the Asset. But until you've saved the Entry, this will be considered a temporary Asset. After all, if you abandon your changes to the Entry, is it still worth saving the newly uploaded Asset?
"In the local temp folder" will drop those temporary assets into the Temporary Assets folder. That folder is exactly what it says... a temporary location for uploaded assets. Once you've properly saved your Entry, the new Asset will be moved to the appropriate location.
It's worth noting, Assets stored in the Temporary Assets folder are real assets. You may not have a front-end path to reach them, but by all other measures they are real Assets as far as Craft is concerned.