Forget "pew pew pew," the boomsticks are here

[Cray]

I assume that the spectacular cloud of plasma that forms during a railgun test is a result of the missile travelling through the atmosphere

Nope. If it was atmospheric effects, the nose of the project would be sheathed in plasma, too, like a shooting star. Rather, what's happening is that railguns generate a great deal of electrical arcing and ablation of the projectile (and sometimes the rails). Plasma pressure is a non-trivial source of propulsion for the projectile. If you look at the sabots (link below), you'll see the stern is cupped to ride on that gas (well, plasma) pressure.

For atmosphere effects, notice the second post in this thread by a "Kyler." His third picture clearly shows the trace of a shockwave. Meanwhile, his second picture shows a close-up of a projectile where none of the front end is engaged in plasma effects. It's just trailing off the stern.
http://www.kbismarck.org/forum/viewtopic...=36&t=2919

There's a closeup of the sabot in this link:
http://nextbigfuture.com/2011/04/general...pdate.html

But the most awesome site on railguns is this link, a hobbyist who builds these. He has a lot to say about the plasma pressure and arcing:
http://www.powerlabs.org/railgun.htm

"my previous attempts at building Rail Guns were never very successful: they would either weld the projectile to the rails, or blow apart from plasma pressure"

His post on "Rails, Rail Enclosure, and Armature Design" goes into the problem of plasma pressure, projectile design, and evaporation. Further down, you see some railgun firing sequences (and videos) generating incredible muzzle flashes, which are explained in the link.
http://www.powerlabs.org/images/shotstrip.jpg

If a railgun were fired in the vacuum of space, this plasma would not be visible.

The plasma from the evaporating projectile would be highly visible. You wouldn't get as much oxidation from a burning aluminum projectile, but the metal would still be glowing white-hot.

This guy also filmed a demo for the Discovery Channel and ran into a problem (discussed near the end of the page):
http://www.powerlabs.org/railgun2.htm

This armature, much to my dismay, EXPLODED inside the barrel, creating an incredible blast and a shower of fragments from the muzzle.
Since the gun was designed to withstand over ten thousand PSI, no damage of any sort occurred and filming went on as planned. The exploding armatures looked spectacular on camera, but didn't do much more electrical efficiency. After several shots were fired carbon vapor deposited itself on the insulators and created a rail-to-rail flashover condition. A further analysis revealed redeposited copper vapor all over the rail channel.