Tip #2 is the logical follow-on from Tip #1 "If In Doubt, Throw It Out," (DDJ, September 2005). In deciding if a local exception should be caught or pitched out, well-factored and highly focused code is ideal. Refactoring is fundamental to good programming practice in so many ways, an important one being that it helps you understand the finer points of the method contract. This removes doubt and leads to better decisions regarding exceptions.
The smaller your functions, the easier it is to tell whether what just happened was normal. Because each function can clearly specify exactly what should be expected, knowing whether to throw an exception becomes obvious. Large functions obscure or even obliviate the contract they're supposed to fullfill.
Benjamin Booth