I am one of the core folks at Engine Yard working on JRuby, so I thought I'd answer a few questions:
* JRuby makes sense for a lot of folks that depend on or like the JVM but that want to use Ruby or Rails. No other web framework has had as much work done on supporting modern web development, and having it for the JVM makes a lot of sense.
* JRuby is at least as fast and often much faster than the standard C implementations of Ruby. We do compile Ruby to JVM bytecode as needed, and have done a lot of work to make sure things perform well.
Don't think about JRuby or Java as being "interpreted/compiled/emulated". The JVM is fast for running JVM bytecode, which Java and Ruby (in JRuby) both compile to. No modern JVM only interprets anymore; they all JIT that bytecode into native code, and in many cases produce code that's as fast as writing in C or C++. JRuby gains the benefit of that, performing at least as well as a Ruby implemented in C and often better because we can leverage the JVM's best features like garbage collection.