The values of x will automatically be centered first with z = scale(x, center = TRUE, scale = scale) (with user control over the scale argument). The LISA values are the product of each z value with the weighted sum of their respective surrounding value: $$I_i = z_i \sum_j w_{ij} z_j$$ (or in R code: lisa = z * (w %*% z)). These are for exploratory analysis and model diagnostics.
An above-average value (i.e. positive z-value) with positive mean spatial lag indicates local positive spatial autocorrelation and is designated type "High-High"; a low value surrounded by high values indicates negative spatial autocorrelation and is designated type "Low-High", and so on.
This function uses Equation 7 from Anselin (1995). Note that the spdep package uses Formula 12, which divides the same value by a constant term \(\sum_i z_i^2/n\). So the geostan version can be made equal to the spdep version by dividing by that value.