How to do a newline in output

Use "\n" instead of '\n'

You can do this all in the File.open block:

Dir.chdir 'C:/Users/name/Music'
music = Dir['C:/Users/name/Music/*.{mp3, MP3}']
puts 'what would you like to call the playlist?'
playlist_name = gets.chomp + '.m3u'

File.open playlist_name, 'w' do |f|
  music.each do |z|
    f.puts z
  end
end