Variable substitution happens when a target step is run on a target host. The step can be in a plan, in a component being installed on the target host, or in a component already installed on the target host. If there is a state associated with the target host and component, it is used to determine the value of a particular substitution variable, and can include:
Target component - The component to be installed
Target host - The host upon which the plan is to be run
Target variable settings source - A collection of name-value pairs that will override the the default values defined in the component
Local variables - Any variables in the target step itself, such as those you have declared in the enclosing block or plan