Explain unfolding vars and environment vars

How to use variables (especially environment vars) is not greatly explained in previous docs.

I tried to add my explanation how to use it.
I guess my concern lies with the term "unfolding". Since the other section is "environment" it would make sense to differentiate the first section based on the same criteria of origin. In other words, how do you reference variables that are defined locally or defined in the environment.

Thoughts?