An outer bag is nothing but a relation. In the below example, A is a relation or bag of tuples. You can think of this bag as an outer bag.
A = LOAD 'data' as (f1:int, f2:int, f3:int);
An inner bag is a relation inside any other bag.
Now, suppose we group relation A by the first field to form relation X.
In this example, X is a relation or bag of tuples. The tuples in relation X have two fields. The first field is type int. The second field is type bag; you can think of this bag as an inner bag.
X = GROUP A BY f1;