function wpt_excerpt_length

I'm not sure i understand how this works.

function wpt_excerpt_length($length) { return 16; }

add_filter('excerpt_length', 'wpt_excerpt_length', 999);

We've created a function that will call on $length and change it to 16. So $length was set by WP by default specifically to be excerpt length at a global level?. So if i echo out the var $length anywhere in my WP code it will give me the length of my excerpts?! It seems like a fairly generic var label. If so, after excerpt_length is requested the function wpt_excerpt_length is run and $length now = 16 globally? I mustn't be understanding this correctly.