More examples:

In this example, I am declaring v_first in the outer and v_second in the inner. In the inner I can use v_first because it was declared in the outer. Note that both v_first and v_second are displayed.

SET SERVEROUTPUT ON
DECLARE
  v_first NUMBER :=212;
  v_msg   VARCHAR2(20) :='* Outer define *';
  out_msg VARCHAR2(20);
  out_ans   NUMBER;
BEGIN
    out_msg := v_msg;
    out_ans := v_first *2;
    dbms_output.put_line('BEFORE INNER DEFINE');
    dbms_output.put_line(v_first||v_msg||out_msg||out_ans);
    DECLARE
      v_second NUMBER := 555;
      v_msg VARCHAR2(20) := '* Inner define *';
      in_msg VARCHAR2(20);
      in_ans NUMBER;
    BEGIN
      in_msg := v_msg;
      in_ans := v_first * 2;
      dbms_output.put_line('INNER LOOP SHOWING INNER');
      dbms_output.put_line(v_first||v_second||v_msg||in_msg||in_ans);
      dbms_output.put_line('INNER LOOP SHOWING OUTER');
      dbms_output.put_line(out_msg||out_ans);
    END;
    dbms_output.put_line('AFTER INNER/BACK TO OUTER'||v_first||v_msg);
    dbms_output.put_line('OUTER LOOP SHOWING OUTER'||out_msg||out_ans);
    /* Note that when I try to show inner definitions here, in_msg and
       in_ans it crashes */
END;
/
SET SERVEROUTPUT OFF

SQL> @ nest2_intro
BEFORE INNER DEFINE
212* Outer define ** Outer define *424
INNER LOOP SHOWING INNER
212555* Inner define ** Inner define *424
INNER LOOP SHOWING OUTER
* Outer define *424
AFTER INNER/BACK TO OUTER212* Outer define *
OUTER LOOP SHOWING OUTER* Outer define *424

PL/SQL procedure successfully completed.
In this example, I am trying to use v_second which was declared in the inner after I have closed in inner and returned to the outer. Note that the program does not work because it claims that v_second has not been declared. The outer is not aware of the declarations in the inner. 
SET SERVEROUTPUT ON
DECLARE
  v_first NUMBER :=212;
  v_msg   VARCHAR2(20) :='* Outer define *';
  out_msg VARCHAR2(20);
  out_ans   NUMBER;
BEGIN
    out_msg := v_msg;
    out_ans := v_first *2;
    dbms_output.put_line('BEFORE INNER DEFINE');
    dbms_output.put_line(v_first||v_msg||out_msg||out_ans);
    DECLARE
      v_second NUMBER := 555;
      v_msg VARCHAR2(20) := '* Inner define *';
      in_msg VARCHAR2(20);
      in_ans NUMBER;
    BEGIN
      in_msg := v_msg;
      in_ans := v_first * 2;
      dbms_output.put_line('INNER LOOP SHOWING INNER');
      dbms_output.put_line(v_first||v_second||v_msg||in_msg||in_ans);
      dbms_output.put_line('INNER LOOP SHOWING OUTER');
      dbms_output.put_line(out_msg||out_ans);
    END;
    dbms_output.put_line('AFTER INNER/BACK TO OUTER'||v_first||v_second||v_msg);
    dbms_output.put_line('OUTER LOOP SHOWING OUTER'||out_msg||out_ans);
    /* Note that when I try to show inner definitions here, in_msg and
       in_ans it crashes */
END;
/
SET SERVEROUTPUT OFF
SQL> @ nest3_intro
DECLARE
*
ERROR at line 1:
ORA-06550: line 24, column 64:
PLS-00201: identifier 'V_SECOND' must be declared
ORA-06550: line 24, column 5:
PL/SQL: Statement ignored