It declares a variable whose value will expire in when the current block ends.
IE:
sub MySub {
my $Variable = "hi";
print "in the block, \$Variable is $Variable\n";
}
print "Now, outside the block, \$Variable is $Variable";
Since the $Variable expires once the block is done, the output will be the following:
in the block, $Variable is hi
Now, outside the block, $Variable is