I believe it serves as both, it mostly depends on each person's use case, for example, When you're out exploring in lowsec or nullsec Local chat can be used to know who's relatively close to you, if they are a criminal, and therefore if the could pose a threat to your character.

But in my personal use case Local chat serves as a way to ask for guidance and to make new friends around New Eden, The first Corp I joined over 5 years ago, people of the saiya, was a corp I met because there were recruiters in my local chat sending invitations and whatnot, and when I sent a message asking what a corp even was, I was met with very friendly fellows who helped me start my journey in EVE. I even joined their discord and chatted with them about career paths in EVE.

So in conclusion I believe it can function as both, mostly dependant on the region you're on and who's close to you