how does this work, do you need like php that the isp server got php installed?

ruby is scripting language like PHP or javascript is. you need to have ruby engine installed on your computer in order to run ruby scripts. if you are asking just about ROR, you need to install it (or compile it) on computer you want to run it on.

ruby like PHP is well documented (well not that much but sure has a lot in manual) so i would suggest you to read it

i want to know how you run it but not locally, like php who needs to be installed on distant server, how's that about ruby/rails?

what is the difference in runing php localy or on server!? if you can set it up localy in few more steps your local instalation becomes server?!

Rails is an incredibly popular web development framework. It can be a bit tricky to setup. And it requires an environment that many standard 'shared hosting' plans cannot provide.

To quote one recent RimuHosting VPS customer 'Rails on shared hosting sucks!'.

With a VPS setup you are more in control and you can setup a RoR hosting stack that suits your needs exactly.