By interactive development I mean that you don’t have to demolish a building and rebuild it just to see how a new table fits in your living room, and you don’t have to quit a program and restart it just to see if two new lines of code do their job. You just send those lines to your program while it’s running and they go live immediately. By strongly interactive development I mean that you can, to a point, even modify the building itself, not just its contents, without bringing it down and then up again.
By test-driven I refer to that (unhappily named) style of development, where you start by writing a small specification of your program using code instead of words. Then you write the code that lets the specification (itself a program) be executed without errors; then you write some more of the specification, then some more code to have the specification execute correctly, and so on. Your code turns out better because you wrote it with a continuous focus on what it’s required to do, rather than getting lost in the implementation, and you can re-use the specification later as a test suite to check whenever you make a change that the program still runs correctly.
MozLab seems to be doing well. While I’m writing this, its page at Mozilla Addons , where it was made available eight days ago, reports 647 downloads for the first release (thus no upgrades). If you write Mozilla or AJAX applications and want to give it a try, I’d be happy to hear your thoughts!