Thank you all guys. I have also found below whitepaper. It explains the feature in details.http://www.cisco.com/en/US/prod/collateral/modules/ps5991/white_paper_c11-545453.pdf

Hello Kris,Is there a disadvantage of enabling the local-switching?(e.g can we able to make zones between modules when this feature is enabled?) If there is not, why this feature is disabled by default?Thanks