sorry, Inner loop means...

in this case means,...

you have an signal you want to control.

let's say altitude.
u want this thing to fly an certain altitude, it is now at another altitude。
you must subtract the two and put a number times that error. and may be integrate over time of that number times the error. this resultant signal. you use this signal to control another signal (inthis case pitch angle/or flight path angle) . then the "inner" signal then is used to control servos to change the aircraft state to acheive what you desired as altitude.