Never thought about it until now and realize I say on line. I'm sure I've been saying it way before there was "online". From the above responses it doesn't seem like its a Jersey thing but I've been here all my life don't know where else I would've picked it up.
My family is originally from Kansas and I've lived most of my life in Oklahoma. I've never heard anything but "in line" when waiting with a group of people. The only "online" that I hear is when talking about computers.
We've been to WDW during Jersey week twice and heard a lot about people standing on line. My NYC co-workers often use the phrase "on line" when I would use "in line"
"We're not standing on line for that" was common.
First time I heard the expression was in Godfather II when Connie and her mother discuss if Connie should have to wait on line to speak to her brother... I believe it was decided she would.
I grew up in Western Pennsylvania and we always said "in line." I now live in the South Jersey/Philadelphia area and everyone I know says "in line" but I could see "on line" coming from people who live in North Jersey, since they are practically New Yorkers.
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