Function inside a function.?

Not sure what the author of that code wanted to achieve. Definining a function inside another function does NOT mean that the inner function is only visible inside the outer function. After calling x() the first time, the y() function will be in global scope as well.

(4+3)*(4*2) == 56

Note that PHP doesn't really support "nested functions", as in defined only in the scope of the parent function. All functions are defined globally. See the docs.

X returns (value +3), while Y returns (value*2)

Given a value of 4, this means (4+3) * (4*2) = 7 * 8 = 56.

Although functions are not limited in scope (which means that you can safely 'nest' function definitions), this particular example is prone to errors:

1) You can't call y() before calling x(), because function y() won't actually be defined until x() has executed once.

2) Calling x() twice will cause PHP to redeclare function y(), leading to a fatal error:

Fatal error: Cannot redeclare y()

The solution to both would be to split the code, so that both functions are declared independent of each other:

function x ($y) 
{
  return($y+3);
}

function y ($z)
{
  return ($z*2);
}

This is also a lot more readable.