The REPLACE function in Oracle SQL is used to replace occurrences of a specified substring with another substring. In this query, the inner REPLACE function call REPLACE(cust_last_name, 'son', '') removes the substring 'son' from cust_last_name. The outer REPLACE function call then replaces the substring 'An' with 'O'. For the given data, 'Anderson' would first be transformed to 'Ander' by the inner REPLACE, and then 'Ander' would be transformed to 'Oder' by the outer REPLACE. Similarly, 'Ausson' would first change to 'Aus' by the inner REPLACE, which is unaffected by the outer REPLACE.
Reference can be found in the Oracle Database SQL Language Reference documentation, which details the functionality of string functions, including REPLACE.