You should create a new directory (folder), called "rails-course" (or something similar), on the disk on your machine. Inside this directory you'll create various subdirectories for the Rails applications that you'll be using and working during the course: Scratchpad, auction, and (optionally) your Extra-cise. You'll get instructions, in this packet and from your instructor, as to how to create the necessary subdirectories and where everything goes.
Outline available at http://www.webucator.com/WebDesign/ROR101.cfm.
Class files available at http://www.webucator.com/ClassFiles/ROR101.zip.
Technical requirements listed at http://www.webucator.com/WebDesign/ROR101.cfm#TechReqs.