It means routing data to the Internet directly through the network the user is using rather than going to the operator's network.

When normal roaming, even though you use some local network, all the trafic gets tunnelled out from the local network to your own network provider, to the internet, and then back. So if you're from, say, France, and you visit Australia, all your traffic gets tunned back and forth to France. This is bad. Most eSIM providers work like this, usually tunneling through Israel or Poland.

With LBO you get direct Internet access just like you would with a local SIM.

Basically you need LBO to avoid a VPN connection to some random far away country.