Javascript replace method, replace with "$1"

I'm reading Sitepoints 2007 book "Simply Javascript" and I encountered some code I just can't understand.

It's the following code:

Core.removeClass = function(target, theClass)
{
    var pattern = new RegExp("(^| )" + theClass + "( |$)");
    target.className = target.className.replace(pattern, "$1");
    target.className = target.className.replace(/ $/, "");
};

The first call to the replace method is what puzzles me, I don't understand where the "$1" value comes from or what it means. I would think that the call should replace the found pattern with "".