> What alternative services are there to PayPal that offer the ability to act only as payment processors that get called via an API?
What you're looking for is called a Payment Gateway. The defacto Ruby library for utilizing them is called Active Merchant (http://activemerchant.rubyforge.org/) and it includes ~30 different companies. If you're looking for a list of all the big ones, that's a good place to start.
I've personally used Authorize.net & Paypal before. Braintree is the company name that gets thrown around in 37signals' circle.