It looks like it may not be documented in the api v1 documentation, but it is for v2 api - http://www.yelp.com/developers/documentation/v2/search_api.
From v1 documentation:
Radius to use while searching around specified geo-point. Maximum value = 25. If a radius is not specified, it will be chosen based on the specificity of the location.
From v2 documentation:
Search radius in meters. If the value is too large, a AREA_TOO_LARGE error may be returned. The max value is 40000 meters (25 miles).
It looks like it is in miles for api v1 and meters for radius_filter in v2.