We recommend Ruby 1.8.6 for use with Rails. Ruby 1.8.7, 1.8.5, 1.8.4 and 1.8.2 are still usable too, but version 1.8.3 is not. Ruby 1.8.7 still has some bugs to straighten out.

Source: Compile it yourself
Windows installer: Ruby, popular extensions, editor
OS X 10.4: Ships with broken Ruby, follow this guide
OS X 10.5: Included with developer tools
(then do "gem update rails")

RubyGems is the standard Ruby package manager. It's similar to apt-get, emerge, and other OS package managers.

Download
(extract, then run "ruby setup.rb")

With RubyGems loaded, you can install all of Rails and its dependencies through the command line:

gem install rails

New versions of Rails can be installed the same way. Rails can also be downloaded as stand-alone packages.

Create your application skeleton and start the server:

rails path/to/your/new/application
cd path/to/your/new/application
ruby script/server

You're running Ruby on Rails! Follow the instructions on http://localhost:3000.

There's a world of extensions to the core Rails framework through plugins. They provide cool functionality that may not be needed by most of the people most of the time, but still serve a spot for those exceptions where you do need more. Read more about plugins at Agile Web Development.

The entire Rails core team is using TextMate on Mac OS X. It's a fantastic editor that ships with Ruby on Rails highlighting and macros. If you're not running Apple, checkout RadRails. It's a cross-platform Rails editor build on top of the Eclipse IDE.