XSLT 2.0 and XPath 2.0 Programmer's Reference, 4th Edition (299 page)

Variable References

A
VariableReference
is a reference to a variable. The variable may be declared in an enclosing
for
,
some
, or
every
expression, as described in Chapter 10, or it may be defined outside the XPath expression. In the case of XSLT, this means that it may be declared in an
>
or
>
element in the stylesheet.

Expression	Syntax
VariableReference	$ QName

The use of a
$
sign is necessary to distinguish a variable reference from a reference to an element in the source document:
para
selects a child

element in the source, while
$para
is a reference to a variable.