For Ruby on Rails, the popular route is to use Textmate as the editor, and the terminal. However, that is restricted to Mac. What I use is a Ubuntu 9 partition. That way I am able to use the fantastic Unix terminal natively. I primarily use MySQL for the database. As an editor, I use Gedit with some really handy plugins of all sorts. Gmate is excellent collaboration of plugins, that tries to make Gedit work more like textmate.
In Ubuntu, and other Linux distros, I recommend sticking with the standard install of ruby, which is version 1.8.7. If you wish to use 1.9.1, you can, however it takes some effort to get it working, along with all the gems you may use. For setting up Rails on Ubuntu, this is a great article: https://help.ubuntu.com/community/RubyOnRails