I want to know what is conventional for linux with respect to directory structure.
In particular, I want to setup a directory named 'development' which would be accessed by more than one user.
This directory would have source code for numerous projects. It would look something like what is show below. My question is, where is 'development' typically located? at the top with bin, boot, dev, etc, home, and so on? in usr/local/? I should add that it is possible that more than one user could access this, so locating it in /home/joeuser/ might not make sense.

development
..Java
....project1
......src
......bin
....project2
......src
......bin
..Cpp
....project1
......src
......bin
....project2
......src
......bin

probably somewhere in /usr/, maybe src/? or maybe put the development folder in /usr/

What about /var? (since it is development and changes a lot).

I would create a development user for administrating the files along with a development group and put everything in /home/development
Then put every developer in the development group.
The development user can be handy in order to administer CVS or SVN or whatever versioning tools you use.

Is "var" an abbreviation for 'variable'?

yes.. its supposed to be for logs and files that change in size alot.
check out the FHS documentation for it here.. browse through the whole thing too, its a very informative document.

thanks, i've been looking for a document with that info for a long time

I would go for something like /usr/local/development personally ... a place that wouldn't get touched with an OS upgrade. Also, whatever directory you decide to use should probably be a seperate mountpoint and not just a subdirectory under some parent mountpoint. This simplifies backups, restores, mounting options, and moving it around to different locations if decide you don't like it's current placement.