Variables scope and when to use the $ sign

Variables scope and when to use the $ sign

Hey guys,
I am trying to understand variable scoping in jQuery a bit more. What has always confused me is why some  developers use the $ sign. when declaring variables and why some dont.

For example

  1. function($){
  2.     function plugin(el, options) {
  3.         this.defaults = {
  4.         };
  5.         this.$opts = $.extend({},this.defaults,options);
  6.         this.$el = $(el);
  7.         this.$arr = [];
  8.         this.$group;
  9.         this.$index;
  10.     };
  11.       .... on to functions

OR

  1. function($){
  2.     function plugin(el, options) {
  3.         this.defaults = {
  4.         };
  5.     };
  6.     var var1, var2;
  7.       .... on to functions

AND EVEN a combination of both

  1. function($){
  2.     function plugin(el, options) {
  3.         this.defaults = {
  4.         };
  5.         this.$opts = $.extend({},this.defaults,options);
  6.         this.$el = $(el);
  7.         this.$arr = [];
  8.         this.$group;
  9.         this.$index;
  10.     };
  11.     var var1, var2;
  12.       .... on to functions


What is standard assuming there is one?
Thanks