Guake is already in the official repositories of Ubuntu and many other Distros. For installation, just search the Software Center for 'Guake' or run this command from a Terminal:
sudo apt-get install guake
Once installed, you can find it under Applications > Accessories > Guake in Gnome or by searching the Dash for 'Guake' in Unity.
When Guake is running, right click the Guake icon in notification area and choose 'Preferences' to gain access to the preferences dialog.
We would only discuss a few basic features here.
You can change the Guake window height under the 'General' tab.
Fonts and transparency can be tweaked under the 'Appearance' tab.
The default key for show/hide Guake is 'F12' and the shortcut for opening a new Terminal tab is 'Shift + Ctrl + T'. You can change these under the 'Keyboard Shortcuts' tab.
Adding Guake to the Startup
If you want to run Guake automatically when you boot your PC, go to System > Preferences > Startup Applications in Gnome or search the Dash for 'Startup Applications' if using Unity.
Click the 'Add' button and follow the screenshot below.
While launching Guake for the first time, I hit this error.
Have you installed guake.schemas properly?
The solution is to install the guake.schemas manually by running this command:
gconftool-2 --makefile-install-rule data/guake.schemas
And then, Guake should be able to run successfully.
A few more problems/solutions are listed here.