Understanding the "Scope" setting in Excel's Name Manager

Hello,

When creating new names or editing old ones in the Excel (2010) Name Manager, there is a setting entitled "Scope."  As options for this setting, the drop-down menu displays  the word "Workbook" followed by each of the worksheet (tab) names included in the workbook.

Can someone explain what this setting does and some points to consider when choosing one of the options?  For example, should the sheet name be selected when a particular name will be present only in a single worksheet or does it have more to do with how to get back to that name after it is created?

A number of my workbooks have a large number of worksheet tabs and in some cases, the Name Manager appears to be way overloaded with many of the defined names displaying #REF!.  I'm attempting here to try to understand how this works so that I can streamline the content of my Name Manager.

Thanks