  (Abridged) We present the results of the systematic survey of X-ray sources
in the central region of M31 using the data from XMM-Newton observations
performed in the years 2000-2004. The spectral properties and variability of
123 bright X-ray sources with apparent luminosities between ~10^{36} and
\~5x10^{38} ergs/s were studied in detail. The spectral distribution of M31
X-ray sources, based on the spectral fitting with a power law model is clearly
bimodal with a main peak corresponding to a photon index Gamma ~ 1.75 and a
shoulder at Gamma ~ 2.0-2.2 extending to the soft spectral region, and shows
clear evolution with source luminosity. The distribution of absorbing columns
towards M31 sources derived from spectral analysis has a peak at
N_H~1.2x10^{21} cm^{-2} extending up to 1.3x10^{22} cm^{-2}, with an average
value of (1.52 +/- 0.02)x10^{21} cm^{-2}. More than 80% of sources observed in
two or more observations show significant variability on the time scales of
days to years. About 50% of the sources in our sample are spectrally variable.
The spectral evolution of a number of sources is correlated with the level of
their X-ray flux, while some sources demonstrate complex patterns of evolution
on the hardness-intensity diagram. Based on the similarity of the properties of
M31 X-ray sources and their Galactic counterparts, we expect most of the X-ray
sources in our sample to be accreting binary systems with neutron star and
black hole primaries. A total of 44 X-ray sources can be identified as probable
X-ray binaries. Combining the results of X-ray analysis with available data at
other wavelengths, we classify 7% and 24% of sources in our sample as,
respectively, probable black hole and neutron star candidates.
