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For application development, Engine Yard has more whiz-bang features and allows fine tuning, providing a level of control that Heroku lacks--but it comes at a cost. Heroku was designed to streamline the configuration and deployment process, and eases the administrative burdens typically encountered. By looking at the strengths and weaknesses of each offering, developers can decide which one is more appropriate for their specific needs.
Ruby developers who are interested in cloud-based, platform-as-a-service offerings, are likely to be considering the use of either Engine Yard or Heroku. They are both built on Amazon EC2, and provide developers with a scalable, managed hosting environment, but developers will find that they each have different features and approaches.