Essentially Kismet is a visual scripting language that lets artists and designers do relatively simple things with no programming experience. Think of it like GameMaker or RPGMaker for professional developers.
C++ on the other hand lets programmers work very efficiently with the engine.
UnrealScript was a stop-gap measure between Kismet and C++ for things that were too complicated to do in old-Kismet, but simplistic enough that you wouldn't want a programmer to have to deal with all the management necessary in C++. It was also simple enough that a multi-talented artist or designer could learn it without learning tons of coding practices.
Basically they merged the benefit of UnrealScript for those who would actually want to use it into Kismet by making it more functional, and thus removed the need for it.
Here's an elevator built in Kismet 1 for example:
UnrealScript on the other hand looks much more like regular programming:
Code:
class HelloWorld extends GameInfo;
event InitGame( string Options, out string Error )
{
`log( "Hello, world!" );
}
Edit:
www.youtube.com/watch?v=MOvfn1p92_8&t=5m55s
That video will show you their newest version of Kismet and skip to the correct timestamp.