The former example was much easier for me to understand than the latter, even if it wasn't factored well. But I'm assuming that the functions aren't mucking about with global state or something equally distasteful.
Well, if we assume that both are doing the same work, then the explicitly named variables y, foo, and bar of my second example would, in the first example, have to be global variables, or at least things that are defined in the scope of the definition/call of x.
Given that, I have to say that I, err, and I'm sorry if this sounds a little arrogant, but I don't really believe you when you say that it's easier to understand. It might be easier on the eyes, sure, but to really understand how the first one works, you'd have to look into all the defined helper functions, and see which outer-scope variables they touch (global/module/class scope), and also, probably, have some knowledge of where x is called. In a style closer to the second example, there are less outside dependencies.
Of course, this is all very abstract. I'm not saying there aren't cases where a few variables in global (or class) scope that get mutated by bare functions can't work at all, but as a rule I don't consider it a good style.
I don't really fully understand how the kernel scheduler works, but I know in general how it works, and so I can write software using it. In this sense, a simple implicit abstraction is easier for me to understand than one where I'm peeking under the covers, so to speak.
Even just seeing a few variables or objects passed around, I still don't know exactly what it's doing, or hiding. I can more quickly understand the high level idea with the former example without the details potentially confusing me.
I think it depends on the type of code and how you interact with it. A library that requires its consumer to keep track of a bunch of data and pass it in and out at the right times when it could just as well handle internally is not a very good library. But if we say that all the code the above example is from an application, where a normal change might involve touching all of the mentioned functions, making it explicit where some variable is used.
Some designs don't require your own code to pass around state between functions, because each function can handle state in its own way without dependence on other functions. I've written a lot of such simple scripts where I just need to execute a series of tasks that aren't necessarily related to one another, but do follow each other.
