Options is jQuery.Controller.defaults merged with the 2nd argument passed to a controller (or the first argument passed to the controller's jQuery plugin).
For example:
$.Controller("Tabs",
{
defaults : {
activeClass: "ui-active-state"
}
},
{
init : function(){
this.element.addClass(this.options.activeClass);
}
})
$("#tabs1").tabs() // adds 'ui-active-state'
$("#tabs2").tabs({activeClass : 'active'}) // adds 'active'