What is the best way to make a language switcher (on hover), like for example the Ultimo template has. My Magento site is RWD 1.9.
The onhover effect will entirely be controlled by your theme. The best way would be to add the code into your template somewhere and then just manually create links to the localization stores.
Yes manually switching is ok, but auto switching based on visitors location is better. Here is our extension that automatically switches language, store, currency and tax based on visitor's location - GeoIP Store and Currency Switcher. Also this extension can block separate countries and IPs if you need it.
Here is one more good solution https://www.magentocommerce.com/magento-connect/geoip-redirect-by-amasty.html
It define visitors' locations automatically by IP and redirects them to relevant language and currency.