Error in script

var explosive : Transform;
var explosion : Renderer; //Particle Prefab goes here.

function PlaceExplosive (position : Vector3, rotation : Quaternion = Quaternion.Identity, time : float) {
     var detonator : Transform = Instantiate(explosive, position, rotation) as Transform;

     yield WaitForSeconds(time);

     Destroy(detonator.gameObject);
     Instantiate(explosion, position, rotation);
}

Thats the script, i have about 5 errors in the function so please help me!

There's only one problem in your script, which leads to other problems. You can't set up default parameters, as has been done by UT in C++. So take out your = Quaternion.Identity and all will be fine, except for having to pass the parameter, of course. One important thing to note is that the way you have it set up, your default parameter wouldn't be serving a purpose, in the hypothetical situation where you could use it. The time variables comes last, and it doesn't have a default value, so you'd have to pass a value for rotation. (You could put rotation last, and that would work - again, hypotehtically.)

You could overload the function, having another one that doesn't use that parameter, and then calls the one you already wrote:

function PlaceExplosive (position : Vector3, time : float) {
    PlaceExplosive(position, Quaternion.identity, time);
}

Also, it's Quaternion.identity, not Identity. It doesn't matter though, because it needs to go.