We describe a tailored experimental system used to produce and study Rydberg-interacting atoms excited from dense ultracold atomic gases. The experiment has been optimized for fast duty cycles using a high flux cold atom source and a three beam optical dipole trap. The latter enables tuning of the atomic density and temperature over several orders of magnitude, all the way to the Bose-Einstein condensation transition. An electrode structure surrounding the atoms allows for precise control over electric fields and single-particle sensitive field ionization detection of Rydberg atoms. We review two experiments which highlight the influence of strong Rydberg-Rydberg interactions on different many-body systems. First, the Rydberg blockade effect is used to pre-structure an atomic gas prior to its spontaneous evolution into an ultracold plasma. Second, hybrid states of photons and atoms called dark-state polaritons are studied. By looking at the statistical distribution of Rydberg excited atoms we reveal correlations between dark-state polaritons. These experiments will ultimately provide a deeper understanding of many-body phenomena in strongly-interacting regimes, including the study of strongly-coupled plasmas and interfaces between atoms and light at the quantum level.<\/p>\n