General :: Environment Variable And Current Shell

I am using Red Hat Linux Enterprise 5. I know the theory that -- using export to set environment variable, the environment variable will apply to current and child environment, but without using export to set environment variable, the environment variable will only apply to the current environment. What is the exact definition of "child environment" and "current environment"? For example,

Code:
$ var1=123
$ echo "Hello [$var1]"
The value of var1 (which is 123) is printed in shell, but I think echo is a command invoked by current shell, and it (the echo command) should be a child environment of current shell and the value of var1 should not (because not using export var1=123) impact echo.