When ever you require packages, it looks in the local directory for a sub dir called node_modules.
If not found, searches recursively upwards for same folder, until found (or not).
Each Package that in turn requires other packages, will download the package in its directory – keeping everything completely separate. Nice!
It gets rid of global clashes.
So why use global? Becase some packages contain *.exes – which implies PATH, etc – and that's easier to manage in a global location.