The /usr directory contains its own hierarchy which is similar to the root hierarchy. The /bin and /sbin directories will contain the basic commands needed to boot, run and administer the machine. When you add a package, it usually will install under the /usr hierarchy. Suppose that you want to compile your own software. It isn't something that is provided by the distro, and you would like to protect it from being altered during an upgrade or reinstall. The /usr/local hierarchy won't be touched by the distro.
Many tarballed packages will use /usr however. Often /usr/local/bin isn't added to the PATH.
In a heterogeneous network, where each host runs the same Linux distro, you might have have /bin, /sbin/, /lib, /usr, /opt and other directories mounted read-only. Instead of a local partition, an NFS share is mounted. In such an environment, the /usr/local directory may have a local partition mounted to allow you to install software with the base directory of /usr/local.
If you take any source package using autoconf, and run ./configure --help, you will see this option:
--prefix=PREFIX install architecture-independent files in PREFIX
"./configure --prefix" will create a Makefile that will install the binary in /usr/local/bin, the libraries in /usr/local/lib, the manpage in /usr/local/man, etc.