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From the docs:
enable-local-dispatch is a server optimization that helps avoid unnecessary network traffic when sending and forwarding messages. You enable the optimization by setting this element “true.” When enable-local-dispatch enabled, if a server instance needs to send or forward a message and the message destination is the engine tier’s cluster address or the local server address, then the message is routed internally to the local server instead of being sent via the network. Using this optimization can dramatically improve performance when chained applications process the same request as described in Composing SIP Applications in Developing SIP Applications.
You may want to disable this optimization if you feel that routing internal messages could skew the load on servers in the engine tier, and you prefer to route all requests via a configured load balancer.
By default enable-local-dispatch is set to “false.”