When the Local Include (LI) switch is specified, the directory information on any ++INCLUDE statement is ignored; the file is loaded from the current directory. This might be useful in situations where, for reasons of portability or archival, you might consolidate all of the ++INCLUDE modules associated with a single program into a single directory. Compiling with /LI would then eliminate the need to edit all of the ++INCLUDE statements to remove the directory specifications.
For example, you might use the switch /VC:c:\archive\%f.%e to make a copy of all the source modules associated with a program into the directory c:\archive. To compile to copy made in that directory, you could then log into that directory and use the /LI switch.
Note that a related feature is always activated: when the compiler is unable to locate the specified ++INCLUDE file in the specified directory, or in the BAS: account, it will look in the location where the main source file was loaded from. (In comparison, the /LI switch ignores the specified and BAS: locations and only looks in the current directory.)
Note that when using the compil.exe version of the compiler, if you are compiling from a difference directory than where the source files are, you may need to specify the -l switch in order to establish the current directory context from which the -li switch will be processed.