I've been using my linode box now for about a year and a half as my primary development machine. The reason here is twofold: I can access the machine from anywhere, and I have much better bandwidth on the machine than I'd get from where I currently live. That last bit is key - I live in Hawaii and the internet speeds here leave much to be desired (which is expected for an island in the middle of the pacific). If I need the latest build of ruby, it's not a 20 minute download, it's a 20 second one.

I do all of my work over ssh now. Key based auth allows me to hop in and out as needed, and more importantly it allows me to use libnotify + growl to alert me when things happen on my server. Code finished compiling? Growl pop up to let me know. Message via irssi? Pop up. Makes things feel very seamless. I use git to sync things as needed, vim for development, screen as my multiplexer, and irssi+bitlbee for messaging. It's lovely.