Inline-block elements are placed as block on the base line of a text line, as they are inline elements, so it's the space from the base line to the bottom of the text line that takes up space.
You can use floating elements instead of inline elements:
#container {
background-color: Green;
width: 500px;
overflow: hidden;
}
.thing {
float: left;
background-color: Red;
height: 20px;
width: 18%;
margin-left: 1.25%;
margin-right: 1.25%;
}
#first {margin-left: 0px;}
#last {margin-right: 0px;}
Demo: http://jsfiddle.net/VHkNx/2/