Seeking Clarity: Extending existing widgets Tutorial

https://siteorigin.com/docs/widgets-bundle/getting-started/extending-existing-widgets/

I am struggling to understand an item in the first code block of this tutorial.

function mytheme_extend_button_form( $form_options, $widget ){
    // Lets add a new theme option
    if( !empty($form_options['design']['fields']['theme']['options']) ) {
        $form_options['design']['fields']['theme']['options']['test'] = __('Test Style', 'mytheme');
    }
    return $form_options;
}
add_filter('siteorigin_widgets_form_options_sow-button', 'mytheme_extend_button_form', 10, 2);

What is the ‘mytheme’ string argument on the 4th line? What is it pointing to? `mytheme` isn’t mentioned anywhere else in the tutorial, and I certainly haven’t named anything `mytheme` in my code. Yet, the hook still works and still adds the new `Test Style` option to the widget. I understand that, in this 4th line, we are accessing the `options` array, and adding a fourth item, `’test’ => ‘Test Style’`. I *think* that the `__( $arg1, $arg2 )` portion is some sort of shorthand that alters the constructor (please correct me if I’m wrong and provide a resource so I can learn). But what that second argument does completely eludes me – what is it?

Thanks for the clarity.