Ah, it seems it was changed a bit:
Users with non-Latin usernames are welcome to edit in Wikipedia. However, scripts of non-Latin languages (such as Arabic, Armenian, Chinese, Cyrillic, Greek, Hebrew, Hindi, Japanese, Korean, Thai and others) are illegible to most other contributors of the English Wikipedia. As a courtesy to the rest of the contributors, users with such usernames are encouraged to help them navigate by means of Latin signatures, Latin user redirects, and an explanation on their userpage. http://en.wikipedia.org/wiki/Wikipedia:Username_policy#Non-Latin_usernames
Last I heard, which may have been some months ago, non-Latin usernames were being flat-out blocked on sight. Not because they might be offensive or anything, but because English-speaking admins would be unable to tell them apart in the event of vandalism, etc. There was a big fuss about it from some non-Latin-alphabet-using wikis. The current wording seems like a good compromise to me, and should make this not so much of an issue. But it would still be nice for people to be able to contribute in local-language usernames if desired, IMO. Not, in any case, a blocker feature: get it working first. :)
I hadn't noticed that change either. It's a good one, though. The main issue I have with non-Latin names is that I can't pronounce them. Reading something with unpronounceable words in is much slower than it otherwise would be, since one keeps tripping up over the words. Latin signatures fixes that pretty much completely. There is nothing wrong with names in a foreign languages, it's just foreign scripts which are a problem, all users need to do is transliterate their username as a sig..