what does this code mean?

In the register_sidebar function reference, the li id name is %1$s and the class is %2$s. Example:

register_sidebar(array('name'=>'Sidebar Contact','before_widget' => '<div class="widgy"><li id="%1$s"class="widget %2$s">','after_widget' => '</div>','before_title' => '<h2 class="widgettitle">','after_title' => '</h2>',));

Does the %1$s and %2$s show the class of the widget with a special name, or what? I couldn’t find a description of what this code does. Thanks,

Tom