Source - Link to Full Steam Article 

Local network game transfers allow for Steam users to copy existing Steam game installation and update files from one PC to another over a local area network, without having to download and install from a Steam content server on the internet. This helps you stay below your ISP monthly transfer limits and can speed up installs or updates.

Settings

There are four settings to specify what other PCs + Steam clients can be used for game file transfer. These settings are bi-directional, and to allow local transfers in, local transfers out are automatically enabled. The default setting is "Only my own devices", meaning you can only transfer in and out of PCs where your own account is logged into Steam.

• Off - this client will not look for or allow local game file transfers. It will not download from or transfer to any other PC connected to your LAN.

• Only my own devices - allow transfers to/from another device you are currently logged in with the same Steam account on your LAN (this is the default)

• Only my friends - allow transfers to/from devices your Steam friends are logged into, connected to your LAN

• Any user - allow transfers to/from any device that has Steam running and is connected to your LAN

For the purposes of this lan -- we recommend either "Any user" (Fastest, but turn off AFTER the LAN) or "Only my Friends"

Privacy & Security

A few additional notes about how this feature works from a privacy and security standpoint:

• Only file content part of the original game is transferred, no local save games or configuration files are sent. It also excludes Steam Workshop, Steam Cloud or Steam Shader files.

• If you set your Steam client to allow friends or any user, others users on your LAN can find out what games you have installed.

• The transferred game content is compressed but not encrypted since all sent data is assumed public knowledge.

• All data received from another Steam client is verified and must match the expected content. Any invalid or corrupt data is ignored will not be installed.