In C you can have external static variables that are viewable every where in the file, while internal static variables are only visible in the function but is persistent
I think that people generally stay away from internal static variables. I know strtok() uses one, or something like it, and because of that is probably the most hated function in the C library.
Other languages like C# don't even support it. I think the idea used to be that it was there to provide some semblance of encapsulation (if you can call it that) before the time of OO languages.