You can declare elements inside content models:

Example:

<xs:element name="person">
   <xs:complexType>
      <xs:sequence>
         <xs:element name="name" type="xs:string"/>
      </xs:sequence>
   </xs:complexType>
</xs:element>

which validates:

<my:person><name>Milowski</name></my:person>

The declaration of 'name' is local to 'person'.