First I would like to mention that Lie groups appear as global symmetries as well as local gauge symmetries.
Look at ordinary rotations in R³; this symmetry group is called SO(3), which means the group elements are special orthogonal matrices, i.e. with det = 1. One can parameterize these rotations as follows
R(\theta_a) = e^{i\theta^aT^a}
\theta_a are three angles parameterizing the rotations
R(\theta_a) is a 3*3 rotation matrix (don't confuse this with the Euler angles; they are related, but not the same)
T^a are 3*3 matrices, the so-called generators of the group SO(3); at the same time they are the basis of the so(3) algebra (you know what an algebra is, I guess)
One can define the matrix exponential via a Taylor series; the first two ternms read
R(\theta_a) = 1 + i\theta^aT^a
So the Lie algebra so(3) is something like the tangent space of Lie group at identity. This is possible for all Lie groups, not only for SO(3). Because a lot of calculations in the context of Lie groups and a lot of investigations regarding their properties can be done using the generators = using the Lie algebra the latter one is very important. Roughly speaking the local properties of the Lie group are fixed via the Lie algebra, whereas global properties are beyond the scope of the Lie algebra.
Last but not least: what are local gauge symmetries? SO(3) is the global symmetry group of an ordinary sphere S² embedded into R³. One can rotate the sphere as a whole and it will look exactly the same, regardless which rotations one uses.
Now think about the following possibility: for each point in 3-space (or for each point on the sphere S²) define an own set of rotation angles, which means the angles \theta_a depend on the coordinates x_i in 3-space
R(\theta_a) \to R(\theta_a(x_i))
Of course this is no longer a symmetry of the sphere S² because it gets distorted. Two points on the the sphere (two vectors from the center to the two points) define a certain angle between them before the rotations; after the rotation the angle between these two vectors may have changed, so this new operation is not a symmetry operation any more.
In gauge theory one introduces a different object which is invariant under the local gauge symmetry; it's not simply the angle between two vectors. But note that the Lie algebra is still the same as the generators remain constant:
R(\theta_a(x_i)) = e^{i\theta^a(x_i)T^a}