When I started learning Ruby, managing gems was a huge problem to the point I would make fun of it. Now I use RVM which helps you install multiple versions of ruby on one computer. Not only does it do that, but it makes gem management a breeze as well! Beyond RVM, Rails 3 provides us with bundler, which allows you to install gems based on a list of dependancies automatically. Very slick.
Here I will outline how to install and configure RVM as well as manage your gems with RVM and the Rails 3 bundler.