If anyone wants to get a head start in understanding the magic, Ryan Bates has done excellent walkthroughs of the routing DSL and the activerecord query building method chaining source code:
http://railscasts.com/episodes?utf8=%E2%9C%93&search=wal...
edit: to add to the list of stuff that rails does which is 'magical,' I still get uncomfortable over the way that instance variables I set in the controller scope are 'copied' to the view scope. This is obviously a necessary evil though.
The real cost of rails' magic is the rampant and wanton Demeter Violation, which can make testing very difficult in some circumstances.