This sentence:

  The local trace function should return a reference to itself (or to
another function for further tracing in that scope), or None to turn off
tracing in that scope. 

which appears under "How it [the debugger] Works" (http://docs.python.org
http://docs.python.org/library/pdb.html#debugger-hooks) should appear
under the description of (sys.settrace
http://docs.python.org/library/sys.html) since this really part of the
settrace interface and is not limited to the python debugger, pdb, or
debuggers in general.