:- is actually an operator it says that if $1 (first argument to the script) is not set or is null then use /tmp as the value of $DIR and if it's set assign it's value to $DIR.
DIR=${1:-"/tmp"}
is short for
if [ -z $1 ]; then
DIR='/tmp'
else
DIR="$1"
fi
It can be used with any variables not just positional parameters:
$ echo ${HOME:-/tmp} # since $HOME is set it will be displayed.
/home/codaddict
$ unset HOME # unset $HOME.
$ echo ${HOME:-/tmp} # since $HOME is not set, /tmp will be displayed.
/tmp
$