* Is there any requirement for the models to be inherited from ActiveRecord?
No.
* Is it possible to have a model which is not ActiveRecord based?
Yes.
* How Rails will react if it finds such files under /app/models?
Just fine. You obviously won't get all the AR goodness, but otherwise Rails doesn't care. We have several that aren't AR based and they work just fine for what we want to do (interface with some CLI apps, etc.)
-philip
