I am kind of not understand why the reflected radiance from another point in the scene that is not from direct light can influence the incoming radiance? If this is the recursive equation, when will it terminate? What is the base case of it?
After light is emitted from a light source, it can bounce around a scene multiple times, so the incoming radiance at a point includes both light directly from light sources and also light that has bounced off other objects in the direction of this point. In the case of ray tracing, we can generally choose to terminate after a certain number of bounces, since the light being carried decreases per bounce. Another way of terminating the recursion is to set some probability p and terminate any ray with probability p after every bounce.