When you say 'local machine' I assume you mean the 'client side'.
If this is the case you can try using "file:///C:/temp.pdf" in the iframe src. It will depend on the browser/plugin/settings if this will work or not, since the file:/// prefix tends to throw security warnings for some people.
You can quickly read up on it here:
http://en.wikipedia.org/wiki/File_URI_scheme[
^]
If this does not help in your situation, it might be best to generate the pdf server side and then show it in the iframe using a normal http(s) url.
Hope this helps.