Never seen while being used inside of qutation while being assign to $code(on line 11)

while is not being used "inside" a quotation... $code is just a string being used to build up some code which will be evaluated with eval.

In this case, what is $code in line 17?

Depends on what's in the __DATA__ segment.

What does "quoting metacharacters" mean? I understand what metacharacter is(special character such as $ or ^) but just what is quoting metachracter mean??

Metacharacters in this example are characters which have special meaning in a regular expression, such as ] [ } { ) ( ^ $. See regular expressions.

Since the loop is building code to be evaluated, it needs to escape regexp metacharacters so that they'll be correct after the eval.

-David