I recall there was a post a week ago saying that Rails 3.1 will go with CoffeeScript. Maybe they received lots of negative feedback on that shot, so they fall back to plan B.
Maybe somebody in the Rails core team should write a blog to clarify their strategy on their Javascript integration.
For reference: http://jashkenas.github.com/coffee-script/
CoffeeScript is much like HAML or SASS, where the end result is actual Javascript that can be parsed by the browser. It's only designed to make it easier to write the code, not to replace the code. When I write HAML in my Rails app, the app parses it and send the browser actual HTML. CS will do the same.
You can also use Javascript and jQuery directly.
Or you can write CoffeeScript without using jQuery at all.