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What the T' and I' are is the template and image minus the mean in the area of the template. Since they are the same size, for both images, it's simply the subtraction of the mean. IE template - mean(template) and image - mean(image).
Then x and y are zero, so only the x' and y' matter in the other part of the equation. That would be the offset to the portion of the image you are matching, and in this case, the whole image is that portion.
