What happens when a variable is not declared in function definition

Generally in C program the function definition and calling takes the form as given below:

main() 
{ 
    int x,y,z; 
   z=sample(x,y); 
    printf("%d",z); 
} 
sample(x1,y1) 
    int x1,y1; 
{ 
    int z1; 
   z1= x1 - y1; 
    return(z1); 
} 

Here what happens is the values x, y gets passed to x1,y1 and the value z1 is calculated in sample function and the value z1 is returned which is got in z. This value namely z is then printed. Now let us see if the variables are not declared before the braces in the function and if it declared as below:

main() 
{ 
    int x=10; 
   int z; 
   z=sample(x); 
    printf("%d",z); 
}  
sample(x1) 
{ 
    int x1; 
    int z1; 
   z1= x1+20; 
    return(z1); 
} 

This would give an error. Surprised!!!!!! Yes because the variable x1 is not declared before the braces of the function and so by default would be assumed to be a integer variable. Again the declaration of integer variable x1 inside the function braces would give an error as Redeclaration of variable x.