The Rails Way kicks ass once you already know Rails to a certain extent - it's definitely not a first book. It's a "bible" type book and is stuck somewhere back in Rails 2.1 land, I believe, but most of it still applies.
AWDwR is reasonable and mostly up to date (focused at Rails 2.2, as far as I recall) and particularly suited for people who are totally new to Rails.
My recommendation for people who are new to both Ruby and Rails is Foundation Rails 2 by Eldon Alameda as it has a 30 page primer to Ruby included and spends a long time "touring" Rails. It also covers RSpec which, given you're Agile, might be of significant interest to you.
Books I'd steer away from either because they're out of date or just plain bad IMHO would be all of the Packt books and Beginning Rails from Apress (the latter, hopefully, will be brought up to date in a 2nd edition).
- Well-Grounded Rubyist by David A. Black (infinite number stars!)
- the 2 Wrox books, Professional Rails (Rappin), Art of (Benson)
- Advanced rails (Oreilly, Ediger);
The one i'd stear clear of, i don't remember who wrote it, but it has a picture of an ocean wave on the cover.
The Well Grounded Rubyist is okay but yeah, you'd definitely need good OO experience first because it doesn't go into OO basics whatsoever. It does cover the dynamic features of Ruby quite well though.
I also forgot to mention the Sitepoint book - Build Your Own Ruby on Rails Web Applications. An excellent hobbyist book. I suspect pro developers might find some issues with it though (without cracking it open again I can't elaborate on this but I did hear some comments, despite liking it myself).
For my 2 cents, I'd second both of Peter's suggestions - Foundation Rails 2 and Simply Rails 2 - though I do tend to like the former a little more. The latter is better if you have absolutely no prior web dev or programming experience.
I don't know that it still has the presence in the community that it first had but I'm sure it is still a great read.
http://www.pragprog.com/titles/rails3/agile-web-development-...
One great thing with this book is that the foot-notes reference the changes needed to get everything to play nice with 2.3 (the book was written for 2.2).
* Recommended Ruby Books (http://antoniocangiano.com/ruby-and-rails-recommended-books/)
I have not updated the Rails page yet, but you should be fine with:
* Agile Web Development with Rails, Third Edition (http://www.pragprog.com/titles/rails3/agile-web-development-...)
Other books you may want to consider afterward are:
* The Art of Rails (http://www.amazon.com/Art-Rails-Programmer/dp/0470189487)
* Enterprise Rails (http://oreilly.com/catalog/9780596515201/).
It'll be a couple months before I really get cranking, but I expect to be finished with the book by the end of the year. I'm also planning to make an extended screencast series once the book is done. You can follow the project's progress at http://railstutorial.org/.
One other really good resource is The Rails Guides: http://guides.rubyonrails.org - they cover everything, and are very up to date. I use them regularly.
http://www.amazon.com/Rails-Way-Addison-Wesley-Professional-...
I've found the peepcode webcasts worth their weight in gold, but that's not a book =)
And I found Design Patterns in Ruby pretty good for Ruby beginners
http://www.amazon.com/Design-Patterns-Ruby-Addison-Wesley-Pr...
has served me well...
http://www.amazon.com/Enterprise-Rails-Dan-Chak/dp/059651520...
As for Rails, I have nothing but good things to about Foundation Rails 2 by Eldon Alameda. He gives a brief introduction to Ruby at the beginning, and doesn't rely on scaffolding/plugins, something a lot of early Rails developers try and overuse. Although, now that I think about it, the routing chapter was a little weak. Of course there's also the standard Agile Web Development with Rails (3rd Edition) which was written by the creator of Rails.
After that, the best place is to start writing apps and get some hands-on experience. If you want, there's another book that Eldon Alameda wrote called "Practical Rails Projects" which does exactly that -- guides you through 6 or 7 Rails projects to teach you all about Rails. However, it uses an older version of Rails (1.2.3 compared to the current 2.3.3) but I'm sure a lot of the concepts will still apply. You can always install an older version of Rails to follow along.
A great help to me was http://www.opensourcerails.com/ It contains a whole bunch of Rails apps to download, and then learn from the code.
"How do I learn Ruby & Rails?" http://news.ycombinator.com/item?id=747342
If you're already very experienced with Ruby, then please ignore. :P