I don't know whether it was just unclear to me or unclear in this article but (after checking man stow), here is the relevant section of the man page that cleared up how it worked for me:
The stow directory is assumed to be the value of the "STOW_DIR" environment variable or if
unset the current directory, and the target directory is assumed to be the parent of the
current directory (so it is typical to execute stow from the directory /usr/local/stow). Each
package given on the command line is the name of a package in the stow directory (e.g., perl).
By default, they are installed into the target directory (but they can be deleted instead using
"-D").
The stow directory is assumed to be the value of the "STOW_DIR" environment variable or if unset the current directory, and the target directory is assumed to be the parent of the current directory (so it is typical to execute stow from the directory /usr/local/stow). Each package given on the command line is the name of a package in the stow directory (e.g., perl). By default, they are installed into the target directory (but they can be deleted instead using "-D").