Funny, I never let my grass get that high and use a mulching mower, so the answer is they get chopped up and deposited back into the lawn.
However, I do head out to the local cemetery several times a year when the grass cutters are there and take 8-10 large bags about 50 lbs. each of the grass clippings to spread in the garden between rows and to add to the compost pile. I just did this recently and am still picking out chopped up silk flowers. Hurricane Isaac's winds tossed most of the faux flowers all over the cemetery and they were run over by the mowers. Those guys like me since they don't have to haul away as many bags on days I visit.