Hi Luo,
It's a way to indent list items in a HTML select element (http://www.w3schools.com/tags/tag_optgroup.asp). The optgroup label isn't selectable and styled differently than the following list items, similar to a heading or title (how exactly depends on the browser) – the code basically looks like this:
<select>
<optgroup label="Swedish Cars">
<option value="volvo">Volvo</option>
<option value="saab">Saab</option>
</optgroup>
<optgroup label="German Cars">
<option value="mercedes">Mercedes</option>
<option value="audi">Audi</option>
</optgroup>
</select>
I tried your code snippet and it seems to correctly add the url_param to the query slug. The search however isn't working a s it should, here's what I did so far and what's happening:
1) fresh WP install
2) installation of the real estate demo content
3) Now when I search for something that's 100% not in the content (e.g. "Volvo") the search result page displays all posts. I compared the search query (http://mywebsite.com/211-2/?city=volvo&state=&sqfeetmin=&sqfeetmax=&pricemin=&pricemax=&wpv_filter_submit=Search) to the query on a demo site I created on discover-wp.com and it's exactly the same (http://tl-3035-re-2.discover-wp.com/211-2/?city=volvo&state=&sqfeetmin=&sqfeetmax=&pricemin=&pricemax=&wpv_filter_submit=Search).
The problem is that while the demo site on discover-wp.com correctly displays "No posts found" my site just displays all posts without applying the search query. I didn't add the aforementioned dropdown by HTML code but used the default HTML your real estate installer created for me. Any idea what's happening here?
Cheers,
Thomas