This is an example of click button to pop up an alert.
Yes its true that you should include your script at the bottom of the page, In your case you are calling jquery function even before core library has loaded. You will have to include your script after jquery library because functions are defined in the library and as the code executes these function has to be referenced
//At the bottom of the page
However, when I test on http://jsfiddle.net/eSud7/3/ the position of the script is not important.
Thats because you have selected to load jquery library on load(Look at the left hand side), so your library is included in the DOM on body load i.e. in your fiddle your giving position of library is redundant
Update on OP comments
AT the bottom of the page
//Contains all the jquery functions