Set-CDDrive -ISOPath parameters?

The example for Set-CDDrive (e.g. at http://www.vmware.com/support/developer/PowerCLI/PowerCLI501/html/Set-CDDrive.html) is

$cd = New-CDDrive -VM VM -ISOPath "[sof-20666-esx:storage1] ISO\testISO.iso"

Is the path "ISO\testISO.iso" on the machine where the powershell script is running, or is it the ESX host?

Also is "[sof-20666-esx:storage1]" a type declaration, or something which I need to discover from the machine running the script (if so, where to find it)?

Thanks for help - I'm so abysmally ignorant and can't find a good starting place to learn from.