Debian is the oldest of the Linux distributions and has a venerable history.
But what attracts me to Ubuntu are the LTS distributions (or Long Term Support). You get a massive 5 years of support for that distribution. So, Ubuntu 12.04 LTS will be backed till 2017! Debian will support the previous release for 1 year.
Also, Ubuntu has the backing of a commercial organisation.
and a specific guide to setting up a Rails server on Ubuntu 12.04 here:
For the process of provisioning your server, see:
and, for Phusion Passenger, this is a useful read:
If you’re on a Mac then use PassengerPane for local Rails deployments (helps avoid cluttered /etc/hosts):
Hint – just use:
$ gem install passenger