How to write a function that manipulates a set of results

Hi

I'm passing this on second hand so forgive me if I'm a bit vague...

My boss is trying to write a function in PL/pgsql that manipulates a
small, temporary set of data. It fetches about 20 rows from a table
of approx 4 million, then it needs to do further calculations to
narrow them down further. Previously we have only written database
code for SQL Server, and there we would use a table variable.
Apparently temporary tables are not equivalent and not suitable for
this.

The closest I've come from reading the docs is functions that return
SETOF. However I can't see any way to query the result set like a
table. Can anyone offer any hints/links?

Thanks
Ashley