In Java your program's "local" variables are maintained in a "stack frame", which is a section of a large array whose elements can contain any data type.
When you call, you copy the parameters (which may be either "scalars" -- chars, ints, floats, etc -- or "references") into a new area of the array (the "top"). Then, during the call, the index values that control which elements of the array you can access are adjusted, and the copied parameters become the "bottom" of a new stack frame, with the called method's local variables being above parameters. So to the new method its copies of the parameters are just like local variables.
Effectively, each method has a "window" into the overall stack, and the "windows" overlap to cover the parameter list.
Of course, when you "pass" an object you're really just passing a reference to the object, and the object itself is not copied.