Let me start by saying I am completely clueless in this realm and therefore my question may sound silly to you. But...

Are there any hosting services out there that offer web servers capable of accepting XML requests or ruby on rails development?

If there are could someone point me in the direction of a reputable hosting service?

What do you mean by accepting XML requests? What is it you're trying to do?

Heroku is one of the easiest ways to get a Rails app hosted quick, if you're just experimenting. Engine Yard is a beefy Rails host for apps with higher load.

That's a good question, let's just say mobile devices would be querying the server using forms and expecting the data to come back in formatted way for the device.

You can do that on any server/framework. If you need high security, WS-* compliant services have benefits. For light-weight stuff, a simple REST service in any framework will work.

What backend makes the most sense depends a lot on what server-side processing you're doing, or whether or not you need to do interop with some existing systems.

You'll have to be a lot more specific to get useful recommendations. So far, you're describing almost every website on the Internet that has a <form> element.

This is what I get for asking for someone else. I really have no idea and just posted what I was asked to ask people. :p When I get more details I'll share! Thanks for your time it's appreciated.

EngineYard is the best Rails provider I've used.

I'd really avoid developing a SOAP API unless there's absolutely no other option. However, consuming SOAP services is relatively trivial in Ruby through wsdlDriver. Even more popular is Savon.

Unless you have really enterprisey stuff to use (such as a legacy accounting system, third-party software, FedEx), REST is the best way to go. If you want added security, enforce the API to use HTTPS. There are also different approaches to give REST session-managing abilities (similar to some SOAP implementations that have a challenge/authorization method that require a session key to be passed); if you Google, you'll find several of them.