Engine Yard and heroku are two widely used ruby on rails hosting providers.

A common question is: Which one should I use?
The answer everyone gives: It depends!

Having deployed the same application in both environments, I thought I'd highlight some of the important differences.

#1 "Ease of Use"
Heroku blows Engine Yard away. you install the gem and can deploy your application in minutes. There are also commands you can run on your local machine to get information about your application.
Engine Yard is moving forward, but it is still pretty technical. It's really easy if you have a public github repo, but anything other than that starts to get "more complicated" quickly.

#2 "Architecture"
Engine Yard gives you a "real" virtual machine. This means you've actually got a single CPU virutal host that you ssh into and effectively do whatever you want.
Heroku gives you a sandbox with walls around it, and I think it's a shared environment. It's actually kinda difficult to figure out exactly what they're running as you cannot log onto the machine direction.

#3 "Startup Price"
Heroku gives you a free (as in beer) environment.
Engine Yard let's you run a trial environment for free for a period of time, but you eventually have to pay for it... even if nobody ever visits your site.

#4 "Flexibility"
Heroku lets you do anything you want as long as they've preconfigured it to enable you to be able to do it.
Engine Yard gives you ssh capability to the machine, which means you can do anything you want even if they didn't think it would be a good idea.

Overall, I'd say Heroku is like taking the bus: if enough people want to go the same place at the same time, it's more economical. Engine Yard is like buying a car: it's going to be a bit more expensive and you're going to need to know how to drive, but it is a much more flexible solution.

Source: http://mikemainguy.blogspot.com/2011/08/heroku-is-bus-engineyard-is-car.html