The scoping of type variables in class instances is underspecified. GHC scopes them for the entire instance, Hugs does not.
GHC's approach is more expressive, it is sometimes needed - especially in combination with multi-parameter classes.
Example:
class Ping a b where ping:: a->b
newtype A a = A a
instance (Show b,Ping a b) => Show (A a) where
show (A x) = show (ping x)
This is ambiguous and thus rejected, but we could resolve the ambiguity by annotating 'ping' with its expected type a->b, but that only works if the scoping of the class instance extends to the member definition.
pros
: extends expressiveness, implemented in GHC anyway, was underspecified in Haskell anyway
cons
: very minor: it could break some existing programs as it makes some local functions non-polymorphic, though these would have been badly written
See also: http://hackage.haskell.org/trac/haskell-prime/wiki/ScopedTypeVariables
