Ruby is a black-eyed demon, which is the same type that possessed both Meg and Sam
She possesses a knife which can kill demons, something even Bobby hadn't heard of.
In 3.04 she says to Sam, "Think of me as a little fallen angel on your shoulder", which (after Dean's discussion in that episode with Casey) could be a clue as to her demonic identity.

Ruby first appears to watch the Sam as Bobby and the Winchesters track the Seven Deadly Sins demons. She joins in the fight as Sam is attacked, and uses a knife that appears to be able to kill demons, and then disappears mysteriously.

Ruby meets with Sam unexpectedly as he researches ways to save Dean's soul.

She claims she is a hunter, and insinuates things about Sam's past and his destiny, setting him on a path to research more about Mary Winchester.

Disturbed to find all of his mother's friends are dead, Sam demands to know exactly who she is. Ruby reveals she is a demon, and claims that Sam fascinates her and, in the pursuit of knowledge for her own ends, is "on his side".
The episode ends with her offering Sam a deal - he works with her to find out more about his destiny, she helps him save Dean's soul from the Crossroads Demon.

Sam tells Dean about his encounter with Ruby, although not about the information she gave him about the deaths of Mary's friends. Dean is angry that Sam didn't kill the demon, while Sam insists that they can use her to get information about the demons they are battling, as well Dean's deal with the Crossroads Demon.

Ruby comes to Bobby while he is working on The Colt. Bobby shoots her with it, but with no effect. Ruby offers to help Bobby make it work, and they succeed - Bobby brings the Colt to a hunt Dean and Sam are on and Sam kills two demons with it. Later, Ruby and Sam argue - Ruby threatens to take the Colt from Sam and give it to someone else who'll use it; Sam threatens Ruby with the Colt. They come to a truce again when Ruby reminds Sam that if he kills her, she can't help him save Dean's soul. She refers to herself as "the little fallen angel' on Sam's shoulder.

In Magnus Malfarium AKA the Witch Episode, we learn that Ruby was a Witch herself. We learn that Ruby has not forgotten what it's like to be human, wich is her reason for helping the Winchesters. Ruby also reveals to Dean that there is no way to save him, and that ALL demons were once human - and yes, he'll be one too. She asks Dean to help her get Sam ready to fight the war after he's gone.

We also find out from Ruby that she was alive durring the Plague. Ruby is a Centuries old demon.