From Wikipedia:
Where is said "Local repository" located physically (in the file system)?
The Working Directory is wherever your files are on your local machine. The Local Repository is the .git/
subdirectory inside the Working Directory. The Index is a conceptual place that also physically resides in the .git/
subdirectory.
I think people very frequently use "repository" to refer to the combination of work tree and .git directory (though that's not how it's used in the diagram in the question).
@Greg Hewgill Oops... I was totally confused by the new terminology. Thanks for correcting this misconception. +1. I am taking this opportunity to also thank the so many who pointed out my misconception.
By default .git directory is hidden inside working directory in windows.