on scope and shadowing
as CaringDev mentioned (but not explained) you will probably see what the shadowing is about when you make the scope a bit more obvious (using the let ... in ... construct #light let you shorten a bit - but you still can use it even without #light off)
Try this:
> let a = 233 in let a = 555 in a;;
val it : int = 555
as you can see the expression evaluates to the shadowed value of a - but the original is not lost:
> let a = 233 in (let a = 555 in a), a;;
val it : int * int = (555, 233)
it's just not in scope in the inner let ... in ...
btw: you can rewrite your example to:
let fctn =
let a = 123 in
(let a =123 in a)
(I added the parentheses just to make this more obvious)
the other on the module level really defines a value for the scope of the module and is not really an expression but a definition