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I've researched this at some length, and it appears that a language called Groovy is involved. Grails was formerly known as Groovy on Rails (I know) but the whole thing is essentially a J2EE framework.

Has the world gone mad?

Not really, for the ruby proponents here, ruby more or less is also a copy of smalltalk which in its clearness is way better than ruby so much for flaming...

Anyway groovy, was started a few years ago sort of as a scripting java, which means a scripting language which tries to fix the most inherent problems of java (the setter and getter methods for properties for instance)
Since it went for maximum compatibility it always compiled (yes you get class files) against the JVM.

Groovy outside of the java world is rather unknown in the java world it is very popular, because it is easy to switch over due to its dual syntax, you basically can program the java way, or do it the groovy way with a reduced syntax. And the programs are more or less readable by anyone who can read java.

As for grails. It started as a rails clone, but went into its own direction the last two years and it is not JEE, it uses hibernate as underlying orm technology and spring as binding layer. Both are very popular non JEE technologies, used inside JEE containers.

Grails is no joke. It was once 'groovy on rails', but they changed it to 'groovy on grails'. Groovy have many Ruby-like features, but it is designed as for maximum compatibility with the Java language. I find that Groovy is easier to learn than Ruby, since my fingers can keep typing {} around code blocks and I can use Java syntax in Groovy at least 99% of the time. Grails is a Rails-like web application framework, but is leverages Hibernate, Spring, Quartz and some other Java frameworks that escape me at the moment. So, despite its relative youth, Grails is remarkably stable and fast for a version 1.0 framework.