LABELS vs. local defines

[linus!ramsdell@Mitre-Bedford]

Many Schemes, including the one described in Abelson
and Sussman's book, eliminate LABELS in favor of
local defines.  Local defines allow iterative factorial
to be written as:

(define (fact n)
  (define (fact n a)
     (if (zero? n)
	 a
	 (fact (-1+ n) (* n a))))
  (fact n 1))

In essence, all lexical contours are mutatable, as opposed to
only allowing locales, but not lambda contours to mutate, as
is done in T.  I once heard the argument as to why T has
these two types of enviroments, but I am unable to reconstruct
it now.  Something about compilation I recollect.
Could some one fill in the rest?
John