pgsql & transaction doubt

Hi all,
a little doubt that came into my mind reading the official manual (chapter 37,
page 677): "functions and trigger procedures are always executed within a
transaction established by an outer query". What does "outer" means? If I'd
like a function to be execute within a transaction should I manually begin
and end the transaction or is the procedure code always executed in a kind of
subtransaction? I mean, supposing a function raises an exception, what
happens to all the sql statement issued by the function before the exception?
Are they automatically rollbacked?

Thanks,
Luca