If you use iPython on OS X, you've probably seen this: Leopard libedit detected., and then noticed some very quirky behavior related to spacing, and command history. In short, that behavior is related to default version of the readline library bundled in OS X (It's not GNU readline).
If you use pip and virtualenv, just instalilng readline doesn't help. So, how do you fix this? Well, the quick and dirty way to fix this is with:
easy_install -a readline
For the whole story, see this discussion: https://groups.google.com/forum/#!topic/python-virtualenv/BEQAurh9EZw/discussion
Many thanks to @idangazit for this tweet which helped me find this "solution".