Tracking the key code and adding 4 spaces to the element should do it. You can prevent the default when the tab key is pressed. Like so?:
Edit after all comments:
Ahh, ok so you're actually asking for several JS functions (get cursor position in text area, change text, set cursor position in text area). A little more looking around would have given you all of these, but since I'm a nice guy I'll put it in there for ya. The other answers can be found in this post about getCursorPosition() and this post about setCursorPosition(). I updated the jsFiddle for ya. Here's the code update
<script>
$('#myarea').on('keydown', function(e) {
var thecode = e.keyCode || e.which;
if (thecode == 9) {
e.preventDefault();
var html = $('#myarea').val();
var pos = $('#myarea').getCursorPosition(); // get cursor position
var prepend = html.substring(0,pos);
var append = html.replace(prepend,'');
var newVal = prepend+' '+append;
$('#myarea').val(newVal);
$('#myarea').setCursorPosition(pos+4);
}
});
new function($) {
$.fn.getCursorPosition = function() {
var pos = 0;
var el = $(this).get(0);
// IE Support
if (document.selection) {
el.focus();
var Sel = document.selection.createRange();
var SelLength = document.selection.createRange().text.length;
Sel.moveStart('character', -el.value.length);
pos = Sel.text.length - SelLength;
}
// Firefox support
else if (el.selectionStart || el.selectionStart == '0')
pos = el.selectionStart;
return pos;
}
} (jQuery);
new function($) {
$.fn.setCursorPosition = function(pos) {
if ($(this).get(0).setSelectionRange) {
$(this).get(0).setSelectionRange(pos, pos);
} else if ($(this).get(0).createTextRange) {
var range = $(this).get(0).createTextRange();
range.collapse(true);
range.moveEnd('character', pos);
range.moveStart('character', pos);
range.select();
}
}
}(jQuery);
</script>
<textarea id="myarea"></textarea>