jQuery working in jsFiddle but not in html

I feel like a complete idiot, and I am sure I am just up to late... but I can not get this to work. On jsFiddle it works wonderfully but when I put it on my html document it does not. Please help! I do not know where the error is. Here is my html:

<!DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd">
<html xmlns="http://www.w3.org/1999/xhtml">
<head>
<meta http-equiv="Content-Type" content="text/html; charset=utf-8" />
<title>Untitled Document</title>
<link rel="stylesheet" href="test-isla.css" type="text/css" />

</head>

<body>
<div id="back">
<div class="red" id="div1"></div>
<div class="red1" id="div2"></div>
<div class="red2" id="div3"></div>
</div>
<div id="content"><p>Body Content goes here!!</p></div>
<script type="text/javascript" src="http://code.jquery.com/jquery-1.7.1.min.js"></script>
<script type="text/javascript">
    $(document).ready(function(){
        function startfade(){
        $("#div3").fadeIn(3000, function(){
            $(this).delay(2000).fadeOut();
            $("#div2").fadeIn(3000, function(){
                $(this).delay(2000).fadeOut();
                $("#div1").fadeIn(3000, function(){
                    $(this).delay(1000).fadeOut();
                });
        });
        });

        }
        setInterval(function() {
              startfade();
        }, 9000);   
        startfade();
        });
</script>
</body>
</html>

And here is the end result I want to achieve on jsFiddle, where it does work! http://jsfiddle.net/liveandream/TCCn8/46/

Solution

Try to [Run] the fiddle in jsFiddle and then use code from http://jsfiddle.net/draft/ This will give you the exact code used on jsFiddle. This will definitely work.