Here is what I found out -
type refers to a PHP file that will provide methods for this phtml. Examaple:
/app/code/local/modstorm/Block/Filename.php, where all your methods for this block are located. So, if, for example, you have something like $ this-> getMethodName () in your .phtml, you should have the getMethodName () function declared in /app/code/local/modstorm/block/Filename.php .
Hope this helps others too.
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