Jamis has a nice article demonstrating how he decreased the reload time from 2.4 seconds to just 1.1 seconds on CGI access to his Gem Rails application:
Rails’ preferred installation method is RubyGems, a convenient, powerful utility for installing Ruby libraries and applications. Unfortunately, that convenience comes at a price—loading a library via RubyGems adds some overhead. Recent releases of RubyGems have made some good progress in reducing that overhead, but it still exists.
If you’re running WEBrick or FastCGI for development, this is not an issue, though.