Press Return to execute the command, which won't show any output. To make this change take effect, you need to restart the Dock. You can do this using Activity Monitor (find Dock in the process list, select it, then click Quit Process), or in Terminal (type killall Dock). After the Dock restarts (which it will do automatically), activate Application Windows mode in Exposé, and you'll only see windows that reside in the current space.
If you decide you prefer the default Snow Leopard behavior, open Terminal again and enter this command (again, pressing Return to execute it):
defaults delete com.apple.dock wvous-show-windows-in-other-spaces
Restart the Dock again, and Exposé will once again show all windows in all Spaces in Application Windows mode. Thanks to Mac OS X Hints readers HitcoPhila and Mathew White for these two little Exposé tidbits.