It's an anonymous function. When you write:
(function ($){
..
})(jQuery);
It is mostly equivalent to:
function the_function($) {
..
}
the_function(jQuery);
The only difference being that the first does not create a function called the_function and therefore created no risk of accidentally overwriting an existing function or variable with that name. And of course, all of it is equivalent to:
function the_function() {
var $ = jQuery;
..
}
the_function();
The point of this construct is that any variables defined inside the_function are local and therefore cannot accidentally overwrite any variables or functions in the global scope. For instance, the code inside the function uses $ to represent the jQuery object, but this would conflict with other libraries that use $ as well (such as Prototype). By wrapping the usage of $ inside a function, the Prototype code outside the function remains unaffected.