Localization is the process of adapting a globalized application to a particular culture/locale. Localizing an application requires a basic understanding of the character sets typically used in modern software development and an understanding of the issues associated with them. Localization includes the translation of the application user interface and adapting graphics for a specific culture/locale. The localization process can also include translating any help content associated with the application.
Localization of business solutions requires that you implement the correct business processes and practices for a culture/locale. Differences in how cultures/locales conduct business are heavily shaped by governmental and regulatory requirements. Therefore, localization of business logic can be a massive task.
Localization testing checks how well the build has been translated into a particular target language. This test is based on the results of globalized testing where the functional support for that particular locale has already been verified. If the product is not globalized enough to support a given language, you probably will not try to localize it into that language in the first place!