break it down

gistfile1.js

var nickname = "";
var socket;

//send the chat server your nickname and close the dialog box
function joinChat() 
{
	socket.emit('join', nickname);
	$("#nick-modal").dialog('close')
}

//this is called when a message is sent to the "userlist" socket channel.
//it updates the #userlist div with the array of username's it received
function updateUsers(data) 
{
	html = "";

	for(var i=0;i<data.length;i++) {
		html += '<span id="user_'+data[i]+'">'+data[i]+'<br/></span>'
	}

	$("#userlist").html(html);
}

//
// $(function() {}) i
// this is a self executing function, it's equivalent of $(document).ready(function() {});
$(function() {

        //socket IO library stuff
        //wouldn't worry too much about this
	socket = io.connect();

	socket.on('chat', function (data) {
		console.log(data.user+': '+data.msg);
	});

	socket.on('userlist', updateUsers);

        //this is a dialog box from jquery ui
	$("#nick-modal").dialog({
		height: 120,
		width: 225,	
		modal: true,
		autoOpen: true,
		draggable: false,
		resizable: false,
		closeOnEscape: false,
		buttons: {
			"Join": function() {
				nickname = $("#nick-modal input").val();
				joinChat();
			}
		}
	});
});