So I type:
shane-killians-computer:~ shanekillian$ rails -v -bash: rails: command not found
Shane, You're absolutely right: both the "rails -v" and "rails hello" command should work. And you DO use Terminal's command line.
The problem is your $path variable doesn't know about the directories containing rails or ruby. Look back at the Hivelogic article about halfway down where it talks about "paths". (What it DOESN'T say is that the syntax to set your paths varies depending upon which shell you're using. Terminal will tell you: it will be either "tcsh" or "bash". Looks like you're using bash.)
Google "path Unix" to learn more about setting this variable. To find out what your path is now, type "echo $path", and it will tell you.
Any time you're not sure if your shell knows about a command, type "which <command>", and it will list the directory containing the command. If there's no such command, it will say "command not found."
The easiest way to get around having to learn about the Unix shell on the Mac is to download and install Locomotive (http:// locomotive.raaum.org/). It handles all the path stuff for you, and a great deal more besides.