It's a substitution, but it looks a bit strange because it's using ':' as the separator instead of the more usual '/'. This is because '/' is the character that is being replaced, so using a different separator avoids having to escape it.

In summary, the line looks for all occurances of '/' in $_ and replaces them with '}{dirs}{'.

--
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European Perl Conference - Sept 22/24 2000
<http://www.yapc.org/Europe/>