to delete all lines.
: introduces a command (and moves the cursor to the bottom).
1,$ is an indication of which lines the following command (
d) should work on. In this case the range from line one to the last line (indicated by
$, so you don't need to know the number of lines in the document).
d stands for delete the indicated lines.
There is a shorter form (
:%d) but I find myself never using it. The
:1,$d can be more easily "adapted" to e.g.
:4,$-2d leaving only the first 3 and last 2 lines, deleting the rest.