If your WLAN is tunneled, all client traffic goes back thru an encapsulated tunnel to the ZoneDirector, and then onto the network (ie at the data center). Local break out, means the client traffic goes onto the network at the AP (ie at the site).
Whether locally at the AP, or tunneled back to the ZD, you would need the Client WLAN's VLAN at the switch port where the client traffic hits the network.
Tunnel requires less vlans on the switchport since traffic will be placed on the proper vlan at the controller
Breakout at the edge should improve performance since the traffic can go from the wireless device to its destination without being routed through controller
Ruckus prefers breakout at the edge. This is what we did but it did take some extra work on our core switch and edge switches