Heroku is awesome! It's incredibly easy to deploy your application to, and easy to work with. It handles both development and production applications very well. The basic (free) level can handle quite a bit, and you can scale heroku as your application grows. You don't need to deploy to Heroku right away, there are several web servers that you can develop with locally. Webrick is a built-in web server that comes with Rails. You can also look into using Mongrel or Unicorn.
You should also look into working with Git as your source control.
Jason
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