Correct. On the command line:

    ytplay() { youtube-dl "$1" -o - | vlc - ; }

or:

    ytplay() { youtube-dl "$1" -o - | vlc - #<enter here>
    > } #Where "> "  is bash prompting for more/end of definitoin

In a file (eg: .bashrc), I'd personally prefer:

    ytplay() {
       youtube-dl "${1}" -o - | vlc -
    }

Note that there's very little difference between "$1" and "${1}" in practice, I tend to prefer it for consistency with recommended[1] practice of using ${NAME} rather than $NAME. (And to differentiate something like "${1}${2}" vs "${12}", as you might if $1 was a name, and $2 an extension, or $1 and url-scheme and $2 a host-name (http://hostname -> "${1}${2}" 1="http://" 2="hostname").

[1] http://stackoverflow.com/questions/8748831/bash-why-do-we-ne...