What is the exact meaning of IFS=$'\n'?

If the following example, which sets the IFS environment variable to a line feed character...

IFS=$'\n'

• What does the dollar sign mean exactly?
• What does it do in this specific case?
• Where can I read more on this specific usage (Google doesn't allow special characters in searches and I don't know what to look for otherwise)?

I know what the IFS environment variable is, and what the \n character is (line feed), but why not just use the following form: IFS="\n" (which does not work)?

For example, if I want to loop through every line of a file and want to use a for loop, I could do this:

for line in (< /path/to/file); do
    echo "Line: $line"
done

However, this won't work right unless IFS is set to a line feed character. To get it to work, I'd have to do this:

OLDIFS=$IFS
IFS=$'\n'
for line in (< /path/to/file); do
    echo "Line: $line"
done
IFS=$OLDIFS

Note: I don't need another way for doing the same thing, I know many other already... I'm only curious about that $'\n' and wondered if anyone could give me an explanation on it.

Normally bash doesn't interpret escape sequences in string literals. So if you write \n or "\n" or '\n', that's not a linebreak - it's the letter n (in the first case) or a backslash followed by the letter n (in the other two cases).

$'somestring' is a syntax for string literals with escape sequences. So unlike '\n', $'\n' actually is a linebreak.