While trying to get a new Ruby on Rails application up and running on one of my servers, I came across this:

$ ruby script/server   
./script/../config/boot.rb:29: undefined method `gem' for main:Object (NoMethodError)
        from script/server:2:in `require'
        from script/server:2

Being the first thing I ran after rails <myapp> this is quite an early point in the process to start failing!

The fix turned out to be:

$ sudo gem update --system

The slightly puzzling bit is that this machine already has other RoR applications running on it! I suspect the key difference is that they were developed elsewhere and only run on this machine under apache.