Conceptually, it's spot on. While Twitter is taking off as a quick way to keep in touch with friends and network with colleagues, it has its limitations, including a maximum word count per post and the proliferation of self-promoting updates interspersed among personal updates. Blogging, too, has its limitations. Not everybody takes the time to or even wants to create a full blog post daily. So what if you want to say more than you can on Twitter without clogging the network, but don't want to maintain a full blog?
That, in a nutshell, is Jot.ly's middle ground. Ideally, users can sign up for an account (either with or without OpenID) and start micro-blogging. There are, however, some glitches still in the application. Many people have reported that they never received an activation email, making it impossible to log in and get started. Though I didn't have this problem, there was a longer delay in receiving it than I had expected. As with other Rails Rumble applications, these little hiccups are to be expected since a 48-hour development period is such a small window.
In any event, Jot.ly is definitely one to follow, as I think many people are ready to start "micro-hybrid" blogging.