Install rubygems

$ sudo apt-get install rubygems

First install rubygems by downloading it from www.rubyonrails.org/down, I used version 1.0.1

$ tar xzvf rubygem*tgz
$ cd rubygem*
$ sudo ruby setup.rb
$ sudo mv /usr/bin/gem /usr/bin/gem.bak
$ sudo ln -s /usr/bin/gem1.8 /usr/bin/gem
$ sudo gem install rails --include-dependencies
$ sudo gem install postgres-pr

Note: The rails & rubygem which is in the repository is 1.1.6 which is quite old.

I've found that Postgresql is best to use with Rails click here for my installation notes