Deploying a Rails application means switching it from development to production mode and then putting it somewhere the public can see it. That simple switch requires a lot of change.
For vastly more information on this subject than can possibly fit into this book, explore Deploying Rails Applications: A Step-By-Step Guide (Pragmatic Programmers, 2008). It doesn’t cover Phusion Passenger, which came out right after it was published, but it covers everything else mentioned here and much, much, much more, including other web servers, deploying on Windows, updating deployed applications, and scaling Rails across multiple servers to handle massively busy applications.
Rails 3.0, of course, will be changing the deployment story to some extent, but Phusion Passenger is keeping up.
Running your application in production mode means that it runs all of its queries against your production database, and that it loads Rails’ configuration from config/environments/production.rb. Typically, the shift in environments results in changes to the following settings:
Rails doesn’t check to see if any code has changed every request, so everything runs a lot faster in production mode.
Caching is enabled, letting Rails optimize its performance by minimizing redundant processing.
Verbose error reporting is disabled, so ...