Variable declaration inside main loop
Michael's answer was good, as usual. Let me give you some more background though:

In C/C++ (And in most modern languages) variables have a "scope", or an area where they are defined. 

Global scope:

Variables declared at the top level of your program have global scope, and exist for the life of your program. These variables are usually created on the .data or .bss sections.

Local scope

Variables declared inside a function have local scope. Unless they are static, they get created when the function is entered, and get discarded when the function exits. These variables are created on the stack as part of the function's stack frame.

Object scope

In C++ and other object-oriented languages, instances of objects have their own scope, "instance variables". Every instance of an object has its own set of instance variables. (Think of cars, and a car radio. You and I might own the exact same model of car, but if I set my car's radio station and you set your car's radio to a different station, each instance of the car has a different setting for the radio station.)

Static variables:

Static variables are variables that are declared "statically." That means that they are only created once and persist, even if they are declared inside a scope like a function or a class instance. These have the lifespan of a global variable but can be declared inside a function or in an object.



Loop is a function, so variables declared inside of loop() are local variables. They get created anew every time the function is called, and discarded every time the function exits.