Did you download the .gem file? If so, that's not necessary and it's
probably what's causing your problem. If you run "gem install rails"
and there's a file called "rails*.gem" in the current directory it
will try to install that file but it won't install the dependencies,
hence the error message.
The easiest way to use Rubygems is to let it download the gems and
their dependencies for you automatically. So if you delete that .gem
file and try again, the installation should work.