As part of Silverlight, Microsoft is offering a Dynamic Language Runtime (DLR). In a nutshell it's a runtime on top of the Common Language Runtime (CLR) and enables arbitrary, dynamic languages to target the .NET without sacrificing interoperability support between other dynamic (or static) languages. Up until now .NET was advertised as a platform that could host any language. In reality however this was really limited to static languages, unless you would go to certain lengths and add support for interoperability yourself. The DLR addresses this. For more detailed information I'll have to refer you to Jim Huginin on the DLR.
As part of the DLR, Microsoft is offering a bunch of dynamic languages, including Ruby. They've asked me if they could use the name IronRuby and I didn't have any problems with that. This does not mean they are actually using the prototype I implemented about a year ago. The prototype I worked on is completely unrelated. I didn't (and don't) have anything to do with Microsoft's IronRuby. I do have lots of interest in this area though, and if it wasn't for the stuff I get to work on now, I just may have ended up working in the DLR team.
A while ago I mentioned that I stopped working on IronRuby for reasons including time and 'new knowledge.' This is what I was talking about. The DLR is an important building block for dynamic languages that was missing. Although it's great fun to build a compiler (even more so when there's no spec for the language ;)), its use is going to be very limited if it doesn't integrate well with all the other languages. Or if the other languages don't integrate well with your language. Once I heard about the DLR effort, as well as some interest from Microsoft to implement Ruby, I figured it wouldn't make much sense to continue going down my own path.