The documentation for Clojure with-local-vars and with-bindings doesn't suffice for me to distinguish the two. Any hints?
New vars are temporarily created by with-local-vars. Existing vars are temporarily rebound by with-bindings. In both cases the bindings are thread-local.
Note that with-bindings is, as far as I can tell, primarily useful as a helper to pass bindings from another context by using a map returned by get-thread-bindings. The similar function binding would be more typical when not importing bindings.
Illustrative examples:
(binding [*out* (new java.io.StringWriter)] 
  (print "world!") (str "hello, " *out*))
;=> "hello, world!"
(with-local-vars [*out* (new java.io.StringWriter)] 
  (print "world!") (str "hello," *out*))
;=> world!"hello,#<Var: --unnamed-->"
(with-local-vars [foo (new java.io.StringWriter)] 
  (.write @foo "world") (str "hello, " @foo))
;=> "hello, world"
(binding [foo (new java.io.StringWriter)] 
  (.write @foo "world") (str "hello, " @foo))
;=> CompilerException java.lang.RuntimeException: 
;     Unable to resolve var: foo in this context...
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