To change a column type in Rails, first generate a migration file using the command 'rails generate migration'. Then edit the migration file to include the change_column method specifying the table, column, and new type. Running 'rails db:migrate' applies the change to the database schema. The schema now reflects the new column type. Remember, generating the migration file alone does not change the database; you must run the migration. Also, be cautious with existing data as incompatible types can cause errors or data loss.