Local communications really means "should avast scan call to localhost:xxx" where xxx is the port.
Avast scans (by default) any application that makes calls to a server (something like my.mailserver.com) at port 110 for POP3 mail and calls to a server (something like my.smtpserver.com) at port 25 for SMTP sent mail.
YahooPops runs in your own system; the way control is passed to YahooPops is that it expects to be called on localhost (localhost really means "my own system") port 110 to receive POP3 mail and localhost port 25 to send SMTP mail via YahooPops.
By default avast! does not intercept calls to localhost ports (I think this is more historic than for any other reason - trying to avoid getting proxies into looping conditions). So, unchecking that box will ensure that the mail streams going via YahooPops will be scanned.
Good to know that your mail Yahoo mail is now being scanned.
And remember ... you have to be in here to help and explain this to the next person who comes along needing their Yahoo, Hotmail or whatever scanned.