$'string' is a quoting pattern that will evaluate any baskslash-escaped characters it encloses into their literal equivalents. It's similar in function to
echo -e (at least in bash, not sure about zsh), except that it can also be used in places other than just echoing text.
$'\t' evaluates to a literal tab character, for example.
I've located the zsh user guide section concerning it:
http://zsh.sourceforge.net/Guide/zshguide05.html#l115