It's a subtle scope issue that has to do with how closures and deferred execution work.
If you don't use a local variable, but instead sequence directly, the result IEnumarable is bound to the VARIABLE sequence rather than the VALUE of sequence and at the time the query is executed, the VARIABLE sequence contains the LAST VALUE of sequences.
If you declare another local variable as in Eric's example, the scope is limited to each loop iteration. Therefore it will be evaluated as intended, even if execution is deferred.
