Now it works perfectly. It's easy to work with drop down list using Ajax.

The main differenct with previous version is I used empty instead of remove so second drop box stays on the page which give us more natural feelings when it's updated.

onchange="jQuery(maker_name).remove();

onchange="jQuery('#maker_name').empty();

Working Sample

http://ochiba.pythonanywhere.com/dropdown/default/index

MODEL - db.py

Add the following at the bottom

# Foreign key is used for good practice but not required to use ajax casading drop down
db.define_table('Category',
    Field('Name'))

db.define_table('Maker',
    Field('Name'),
    Field('Category_ID', db.Category),
    Field('Note', 'text'))

db.define_table('Product',
    Field('Part_Number'),
    Field('Maker_ID', db.Maker),
    Field('List_Price', 'decimal(13,2)'),
    Field('Special_Price', 'decimal(13,2)'))

db.Category.Name.requires = IS_NOT_EMPTY()
db.Maker.Name.requires = IS_NOT_EMPTY()
db.Maker.Category_ID.requires = IS_IN_DB(db, db.Category.id, '%(Name)s')
db.Product.Part_Number.requires = IS_NOT_EMPTY()
db.Product.Maker_ID.requires = IS_IN_DB(db, db.Maker.id, '%(Name)s')

# Insert test data - you can delete the line below if it's not necessary

if db(db.Category.id>0).count() == 0:
    db.Category.insert(Name='PC')
    db.Category.insert(Name='Smart Phone')

    db.Maker.insert(Name='Toshiba', Category_ID=1, Note='Good Maker')
    db.Maker.insert(Name='HP', Category_ID=1, Note='Good Maker')
    db.Maker.insert(Name='Dell', Category_ID=1, Note='Good Maker')
    db.Maker.insert(Name='Apple', Category_ID=2, Note='Good Maker')
    db.Maker.insert(Name='Samsung', Category_ID=2, Note='Good Maker')

    db.Product.insert(Part_Number='Toshiba Product A', Maker_ID=1, List_Price=1000, Special_Price=500)
    db.Product.insert(Part_Number='Toshiba Product B', Maker_ID=1, List_Price=1500, Special_Price=1000)
    db.Product.insert(Part_Number='Toshiba Product C', Maker_ID=1, List_Price=2000, Special_Price=1500)
    db.Product.insert(Part_Number='Toshiba Product D', Maker_ID=1, List_Price=2500, Special_Price=2000)
    db.Product.insert(Part_Number='Toshiba Product E', Maker_ID=1, List_Price=3000, Special_Price=2500)
    db.Product.insert(Part_Number='Toshiba Product F', Maker_ID=1, List_Price=3500, Special_Price=3500)

    db.Product.insert(Part_Number='HP Product A', Maker_ID=2, List_Price=1000, Special_Price=500)
    db.Product.insert(Part_Number='HP Product B', Maker_ID=2, List_Price=1500, Special_Price=1000)
    db.Product.insert(Part_Number='HP Product C', Maker_ID=2, List_Price=2000, Special_Price=1500)
    db.Product.insert(Part_Number='HP Product D', Maker_ID=2, List_Price=2500, Special_Price=2000)
    db.Product.insert(Part_Number='HP Product E', Maker_ID=2, List_Price=3000, Special_Price=2500)
    db.Product.insert(Part_Number='HP Product F', Maker_ID=2, List_Price=3500, Special_Price=3500)

    db.Product.insert(Part_Number='Dell Product A', Maker_ID=3, List_Price=1000, Special_Price=500)
    db.Product.insert(Part_Number='Dell Product B', Maker_ID=3, List_Price=1500, Special_Price=1000)
    db.Product.insert(Part_Number='Dell Product C', Maker_ID=3, List_Price=2000, Special_Price=1500)
    db.Product.insert(Part_Number='Dell Product D', Maker_ID=3, List_Price=2500, Special_Price=2000)
    db.Product.insert(Part_Number='Dell Product E', Maker_ID=3, List_Price=3000, Special_Price=2500)
    db.Product.insert(Part_Number='Dell Product F', Maker_ID=3, List_Price=3500, Special_Price=3500)

    db.Product.insert(Part_Number='Apple Product A', Maker_ID=4, List_Price=1000, Special_Price=500)
    db.Product.insert(Part_Number='Apple Product B', Maker_ID=4, List_Price=1500, Special_Price=1000)
    db.Product.insert(Part_Number='Apple Product C', Maker_ID=4, List_Price=2000, Special_Price=1500)
    db.Product.insert(Part_Number='Apple Product D', Maker_ID=4, List_Price=2500, Special_Price=2000)
    db.Product.insert(Part_Number='Apple Product E', Maker_ID=4, List_Price=3000, Special_Price=2500)
    db.Product.insert(Part_Number='Apple Product F', Maker_ID=4, List_Price=3500, Special_Price=3500)

    db.Product.insert(Part_Number='Samsung Product A', Maker_ID=5, List_Price=1000, Special_Price=500)
    db.Product.insert(Part_Number='Samsung Product B', Maker_ID=5, List_Price=1500, Special_Price=1000)
    db.Product.insert(Part_Number='Samsung Product C', Maker_ID=5, List_Price=2000, Special_Price=1500)
    db.Product.insert(Part_Number='Samsung Product D', Maker_ID=5, List_Price=2500, Special_Price=2000)
    db.Product.insert(Part_Number='Samsung Product E', Maker_ID=5, List_Price=3000, Special_Price=2500)
    db.Product.insert(Part_Number='Samsung Product F', Maker_ID=5, List_Price=3500, Special_Price=3500)

CONTROLLER - default.py

# -*- coding: utf-8 -*-

def index():
    if request.vars.maker_name:
        lists = db(db.Product.Maker_ID==request.vars.maker_name).select(db.Product.ALL)
        themakers = db(db.Maker.id==request.vars.maker_name).select(db.Maker.ALL)      

    else:
        lists = db(db.Product.Maker_ID==1).select(db.Product.ALL)
        themakers = db(db.Maker.id==1).select(db.Maker.ALL)

    categories = db().select(db.Category.ALL)

    if request.vars.category_name:
        makers = db(db.Maker.Category_ID==request.vars.category_name).select(db.Maker.ALL)
    else:
        makers = db(db.Maker.Category_ID==1).select(db.Maker.ALL)
    return dict(lists=lists, categories=categories, makers=makers, themakers=themakers)

def maker():
    makers = db(db.Maker.Category_ID==request.vars.category_name).select(db.Maker.ALL)
    result = ""
    for maker in makers:
        result += "<option value='" + str(maker.id) + "'>" + maker.Name + "</option>"  
    return XML(result)

VIEW - default/index.html

{{extend 'layout.html'}}

<form enctype="multipart/form-data" action="{{URL()}}" method="post">
    <select name='category_name' 
        onchange="jQuery('#maker_name').empty();
        ajax('maker', ['category_name'], 'maker_name');">
        {{for category in categories:}}
            <option value="{{=category.id}}" 
                {{=" selected='selected'" if str(category.id)==request.vars.category_name else ""}}>
            {{=category.Name}}
            </option>
        {{pass}}
    </select>

    <select id='maker_name' name='maker_name' >
        {{for maker in makers:}}
            <option value="{{=maker.id}}" 
                {{=XML(" selected='selected'") if str(maker.id)==request.vars.maker_name else ""}}>
            {{=maker.Name}}</option>
        {{pass}}
    </select>
    <input type="submit" value='Submit'>  
</form>

<hr>

<div id="left_price">

    <div id="effective_price">
        {{for themaker in themakers:}}
            <p>{{=themaker.Note}}</p>
        {{pass}}
    </div>


    <table class="pricetable">
        <tr>
            <th class="priceleft">Part Number</th>
            <th class="priceright">List ($)</th>
            <th class="priceright">Special ($)</th>
        </tr>
    </table>

    <div id="table_price">
        <table  class="pricetable">
            {{for list in lists:}}
            <tr>
                <td class="priceleft">{{=list.Part_Number}}</td>
                <td class="priceright">{{=list.List_Price}}</td>
                <td class="priceright">{{=list.Special_Price}}</td>
            </tr>
            {{pass}}
        </table>
    </div>

</div>

<div id="right_price">

</div>