When you say "looks like this," are you viewing this value IRB? It's going to escape non-ASCII range characters with C-style escaping of the byte sequences that represent the characters.
If you print them with puts, you'll get them back as you expect, presuming your shell console is using the same encoding as the string in question (Apparently UTF-8 in this case, based on the two bytes returned for that character). If you are storing the values in a text file, printing to a handle should also result in UTF-8 sequences.
If you need to translate between UTF-8 and other encodings, the specifics depend on whether you're in Ruby 1.9 or 1.8.6.
For 1.9: http://blog.grayproductions.net/articles/ruby_19s_string
for 1.8, you probably need to look at Iconv.
Also, if you need to interact with COM components in Windows, you'll need to tell ruby to use the correct encoding with something like the following:
require 'win32ole'
WIN32OLE.codepage = WIN32OLE::CP_UTF8
If you're interacting with mysql, you'll need to set the collation on the table to one that supports the encoding that you're working with. In general, it's best to set the collation to UTF-8, even if some of your content is coming back in other encodings; you'll just need to convert as necessary.
Nokogiri has some features for dealing with different encodings (probably through Iconv), but I'm a little out of practice with that, so I'll leave explanation of that to someone else.