I read this on the criteria to submit a theme on Tumblr but I don't even know what a localized string is and couldn't figure it out from the search I did.
What is a localized string? Is it something you type on html, css or javascript?
Localized strings are placeholders for text in various languages. They are used to abstract away translation related problems so Tumblr can provide their services in different languages.
Tumblr uses these strings to provide programmers variables which always appear for the end user in the selected language they chose.