I should note that in the function examples I posted, the UDFs return
single scalar values, not result sets.

Thus, a more accurate example would be:

CREATE FUNCTION udf1(@id INT) RETURNS INT
AS SELECT SUM(col1) FROM tbl1
WHERE id = @id

CREATE FUNCTION udf2(id) RETURNS INT
AS SELECT COUNT(*) FROM udf1
WHERE col2 < udf2(id)

Application uses: SELECT udf2(id)

Note: examples do not reflect actual app logic, but simply demonstrate
a nesting example.