trutheality's answer is the best consideration in most languages, and a great response considering that this question wasn't tagged actionscript-3 until later.
However Actionscript uses variable hoisting where variables defined anywhere in the function are scoped to that function rather than its inner most block. This blog post describes it well, and it's mentioned in the docs on variable scope. Due to hoisting, there is no difference in Actionscript between defining the variables before or inside the loop.
To show how crazy this can get, you can even define the variable after the loop:
for (i = 0; i < 5; i++) {
trace(i);
}
var i:int;