OSX Mountain Lion, Sublime Text 2 with a ton of plugins/customisations, RVM to manage rubies+gemsets, Homebrew for postgres/redis/etc, SourceTree (git gui). I used to use TextMate but ST2 is miles ahead in performance, features and looks. It definitely bumps up my productivity a lot.
For running Rails apps locally I use the OSX supplied apache with pow, everything is pretty seamless. For apps that require a bit more than apache/postgres I use foreman to spin up the required services.
For deployment I use Capistrano for everything that’s not on Heroku, Puppet for managing servers and Vagrant for firing up a more realistic test/development environment when needed. Typical deployment environment right now is Apache/NGinx with Passenger but I’ll probably migrate to Unicorn soon.
Aside from the above I will occasionally use CodeKit when working with static sites provided by our designers. For IE testing ievms is awesome, I have a separate VM for each IE version.
All-in-all I find the combination to be fast, easy and completely hassle-free.