First of all, when you are developing rubies, the first thing you need to know is that it works best in an environment like unix, so mac os x, linux, solaris, bsd, etc.
Ruby libraries are distributed and packaged as gems. So you want to install ruby and install rubygems. Then from there you use the gem command to install the ruby libraries.
I'm going to assume that you are talking about web development with ruby on rails 2.x or Merb 1.x. These two structures are merging in the next release, and it will be called Rails 3.0. So the answer here works for one. I'm going to say Rails, but I mean Rails / Merb.
Rails development is performed locally on your computer. Therefore, you will need to install the ruby and all the libraries that you need locally. I know that many people who use Windows use virtualization and run the linux environment for rails in their window on the desktop.
In development, most people use an application server, Mongrel. The current standard in production is to use Apache 2 and Passenger.
With rails, you will want to use a control source. Most people today use git in the rails community, but it's possible to use subversion, perforce, or many other SCMs. To get your application from your source control to your intermediate and production systems, the rails community created an application called Capistrano. It handles the deployment. You configure your server information, ssh keys, determine access, and then you can cancel your application with a single command.
cap deploy
This is a pretty good system. Back a few years ago, when I was working on odeo.com, we had people using windows, linux and mac for development with production deployment for debian linux. It was not intentional that our application be a cross-platform, it just happened because we had people who wanted to add to it, including designers and business classes that were on the windows.
I highly recommend you check out http://guides.rubyonrails.com for more information.