Easy answer - the local payment (also called kitty) is a portion of your total tour price which you pay locally to your Crew at the start of the trip.
This enables tour operators to get cash directly to their Crew for on-the-ground expenses without having to have a bank account in every country or spend a fortune wire transferring it. These costs would be passed onto the client so effectively it also keeps tour prices down a little bit.
However, with recent changes in advertising and consumer protection laws in different countries (Australia and most of Europe especially), the local payment is to be phased out.
This will mean your 'once off' tour price will be all inclusive of your tour cost AND any incurred costs of getting funds to the Ground Crew or activity operators, fluctuating exchange rates and random banking charges. The average increase in tour cost is around 1% at this point.
Not every tour has a local payment and whether it applies can also depend on where you live and what currency you will pay in. Not all laws are completely beneficial to the general public then are they? Feel free to ask any questions about Local Payment below or check out Local Payment info here.