I think it works because while you're inside the let, you don't call anything that depends on a global function named x. :) That's in the FAQ too:
What happens when I locally bind a symbol which has a function definition?
That's not a good idea. The next time that function gets executed within the dynamic context the system may crash. Therefore we have a convention to use an upper case first letter for locally bound symbols:
(de findCar (Car List)
(when (member Car (cdr List))
(list Car (car List)) ) )