Where exactly do the $0 and $1 properties come from when calling reduce on a string?

Question

The book Swift Coding Challenges has the following problem:

"Write a function that accepts a string, and returns how many times a specific character appears, taking case into account."

In one of the solutions

func challenge5b(input: String, count: Character) -> Int {
    return input.reduce(0) {
        $1 == count ? $0 + 1 : $0
    }
}

It's not clear to me where$0 and $1 come from. How exactly does the reduce function work when stepping through the input string?