I wouldn't say "dying," but it's defintely lost much of its momentum:
Google Trends on "ruby on rails":
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For Comparison: Symfony, ASP.NET MVC, Django, CakePHP and Grails
Here are the reasons I believe caused this decline:
Overhype: The framework was very much hyped. Any kind of hype eventually fades. RoR is not a be-all and end-all web development solution; nothing is (yet).
Competition: There are now many quality frameworks for other, more popular languages. Some of them even were modeled after RoR (CakePHP, Grails, Django, etc).
Trends Comparison http://oi55.tinypic.com/k3pzy0.jpg
Ruby: Ruby is a very interesting language, but it has its idiosyncrasies. You can't program in RoR if you can't do Ruby, and proportionally few people know ruby compared to other languages.
