JRuby runs on the Java VM (the interpreter was written in Java), while the original Ruby interpreter was written in C. Both have up- and downsides also (Ruby can use native extensions, JRuby can access to Java types, objects etc.)
JRuby uses Ruby 1.8.6's syntax, 1.9.x will be available soon. JRuby has Java threads (meaning it will scale to many cpus, cores etc.), Ruby has some issues with userspace threading, locking ec.
Personally, I use JRuby with Glassfish v3 and Netbeans for RoR development, it scales a lot better than ruby + loads of mongrels, Apaches and it's easier to manage.