HYPERTEXT LINKS can refer to both the Web and the local server. If you are linking to a file on another server then you must use the full URL. However if you are referring to one of your own files in your own directory, then using the full URL is a waste of time and space. It's unnecessary, because you only need the filename.
e.g. My local directory for this page is "http://www.users.globalnet.co.uk/~andyks/mtsystems". If I am on page1.htm and I want to link to page2.htm, also on the same directory as the present file, I could write a hypertext reference target like this:-
<A HREF="http://www.users.globalnet.co.uk/~andyks/mtsystems/page2.htm"> or,
<A HREF="page2.htm">
!
The second one is not only quicker to write but your server will not be sending a new signal out on the web looking for a file which is sitting in it's own directory. That sounds daft but with band width problems the delay could be perceptable.