The main benefit of having them on a CDN is that the files can be downloaded in parallel to files downloaded from your own website. This reduces latency on every page. So, the flip side of this is a pitfall of hosting locally - increased latency. The main reason for that is that browsers are limited in the number of connections that they can make at the same time to the same web domain. In IE6 this was defaulted to 2 concurrent connections to the same domain - shared between all open windows of IE!! In IE8+ it improved, defaulting to 6, which is inline with FF/Chrome, but still, if you have a lot of images and you are not using sprites, you will experience heavy latency.

Using a CDN, I would always set the library version explicitly rather than getting the latest one. This reduces the risk of new versions breaking your code. Not very likely with jQuery, but possible.

The other main benefit of using a CDN is reduced traffic on your site. If you pay per GB or you are on a virtual server with limited resources, you might find that overall site performance increases and hosting costs come down when you farm off some of your content to a public CDN.

Make sure you also read the other answer to this question by @Xaver. This is a very good trick