Think of s as a special variable tied just to your procedure, keeping its value between its invocations. Since you're going through SICP it should be clear that it's part of the environment that the procedure attached to f lives in.
There is one important thing, when you use (define f .......) without brackets around f, you're defining a value, which "body" is evaluated only once. Therefore, mutable value is initialized only once. And it's also captured by the resulting lambda function, that can do anything with it, but not visible from anywhere else, because it's inside the scope of our definition.
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