nested-archive-widget.js

var years = {};

$('.blog-sidebar .widget_archive a').each(function () {
    var year = this.innerHTML.match(/\d{4}/)[0];
    if (!years[year]) years[year] = [];
    years[year].push(this);
});

_.each(years, function (links, year) {
    var li = $('<li/>'), a = $('<a/>'), ul = $('<ul/>');
    a.appendTo(li).attr('href', '/blog/' + year).text(year);
    ul.appendTo(li);

    _.each(links, function (link) {
        var parent = $(link).parent();
        $('<li/>').appendTo(ul).append(link);
        parent.remove();
    });

    $('.blog-sidebar .widget_archive > ul').prepend(li);
});