Why split the <script> tag when writing it with document.write()?

</script> has to be broken up because otherwise it would end the enclosing <script></script> block too early. Really it should be split between the < and the /, because a script block is supposed (according to SGML) to be terminated by any end-tag open (ETAGO) sequence (i.e. </):

Although the STYLE and SCRIPT elements use CDATA for their data model, for these elements, CDATA must be handled differently by user agents. Markup and entities must be treated as raw text and passed to the application as is. The first occurrence of the character sequence "</" (end-tag open delimiter) is treated as terminating the end of the element's content. In valid documents, this would be the end tag for the element.

However in practice browsers only end parsing a CDATA script block on an actual </script> close-tag.

In XHTML there is no such special handling for script blocks, so any < (or &) character inside them must be &escaped; like in any other element. However then browsers that are parsing XHTML as old-school HTML will get confused. There are workarounds involving CDATA blocks, but it's easiest simply to avoid using these characters unescaped. A better way of writing a script element from script that works on either type of parser would be:

<script type="text/javascript">
    document.write('\x3Cscript type="text/javascript" src="foo.js">\x3C/script>');
</script>

Here's another variation I've used when wanting to generate a script tag inline (so it executes immediately) without needing any form of escapes:

<script>
    var script = document.createElement('script');
    script.src = '/path/to/script.js';
    document.write(script.outerHTML);
</script>

(Note: contrary to most examples on the net, I'm not setting type="text/javascript" on neither the enclosing tag, nor the generated one: there is no browser not having that as the default, and so it is redundant, but will not hurt either, if you disagree).