var ResizingTextArea = Class.create();

ResizingTextArea.prototype = {
defaultRows: 1,

initialize: function(field)
{
this.defaultRows = Math.max(field.rows, 1);
this.resizeNeeded = this.resizeNeeded.bindAsEventListener(this);
Event.observe(field, "click", this.resizeNeeded);
Event.observe(field, "keyup", this.resizeNeeded);
},

resizeNeeded: function(event)
{
var t = Event.element(event);
var lines = t.value.split('\n');
var newRows = lines.length + 1;
var oldRows = t.rows;
for (var i = 0; i <lines.length; i++)
{
var line = lines[i];
if (line.length>= t.cols) newRows += Math.floor(line.length / t.cols);
}
if (newRows> t.rows) t.rows = newRows;
if (newRows
}
}

<textarea name="textarea" onload="new ResizingTextArea(this);"></textarea>