When you are trying to install Rails via Gem, you will have this exception:
# gem install rails
ERROR:  While executing gem ... (Errno::ENOENT)
    No such file or directory - lib

To solve it, the solution is pretty obvious, create 'lib' folder:
 # mkdir /usr/lib/ruby/gems/1.9.1/gems/rails-3.0.3/lib

Then execute the first command again, and done.