When does the browser execute Javascript? How does the execution cursor move?

The answer varies depending on where the script tag is and how you've added it:

Script tags inline with your markup are executed synchronously with the browser's processing of that markup (except, see #2), and so if -- for instance -- those tags reference external files, they tend to slow down the processing of the page. (This is so the browser can handle document.write statements, which change the markup they're processing.)
Script tags with the defer attribute may, on some browsers, not be executed until after the DOM has been fully rendered. Naturally these can't use document.write. (Similarly there's an async attribute that makes the script asynchronous, but I don't know much about it or how well it's supported; details.)
Script tags in content you assign to elements after DOM load (via innerHTML and similar) are not executed at all, barring your use of a library like jQuery or Prototype to do it for you. (With one exception pointed out by Andy E: On IE, if they have a defer attribute, it will execute them. Doesn't work in other browsers.)
If you append an actual script element to the document via Element#appendChild, the browser begins downloading that script immediately and will execute it as soon as the download is finished. Scripts added this way are not executed synchronously or necessarily in order. First appending a <script type="text/javascript" src="MyFct.js"></script>, and then appending <script type="text/javascript">myFunction();</script> may well execute the inline (second) one before the remote (first) one. If that happens and MyFct.js declares myFunction(), it will not be defined when we try to use it with the inline script. If you need things done in order, you can tell when a remote script has been loaded by watching the load and readyStateChange events on the script element you add (load is the event on most browsers, readyStateChange on some versions of IE, and some browsers do both, so you have to handle multiple notifications for the same script).
Script inside event handlers on attributes (<a href='#' onclick='myNiftyJavaScript();'>) rather than in a script tag is executed when the relevant event occurs.

I was working away at my Real Job and suddenly my hindbrain said "You know, you've been told they won't be executed if you assign them to innerHTML, but have you personally checked?" And I hadn't, so I did -- FWIW:

<!DOCTYPE HTML>
<html>
<head>
<meta http-equiv="Content-type" content="text/html;charset=UTF-8">
<title>Script Test Page</title>
<style type='text/css'>
body {
    font-family: sans-serif;
}
</style>
<script type='text/javascript'>
function addScript()
{
    var str, div;

    div = document.getElementById('target');
    str = "Content added<" + "script type='text/javascript'>alert('hi there')<" + "/" + "script>";
    alert("About to add:" + str);
    div.innerHTML = str;
    alert("Done adding script");
}
</script>
</head>
<body><div>
<input type='button' value='Go' onclick='addScript();'>
<div id='target'></div>
</div></body>
</html>

The alert from the script doesn't appear on IE7, FF3.6, or Chrome4 (I haven't bothered to check others, I'm meant to be working :-) ). Whereas if you append elements as shown here, the script gets executed.

If you just stuff a block of HTML containing script tags into your DOM with "innerHTML", the script tags won't be executed at all. When you load stuff with something like jQuery, code in that library explicitly handles finding and executing the scripts.

It's not precisely accurate, but you can basically think of the processing of a <script> tag as if the whole contents of the tag (i.e., the script body) were executed with eval(). If the script declares global (window) variables, then old values are overwritten.

Script tags are processed in the order that they appear. Of course the code inside the script blocks may be set up so that what it does upon initial execution is to defer the real processing until later. Lots of jQuery setup/initialization code will do that.

When does the browser execute Javascript? How does the execution cursor move?

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