You can implement paypals subscriptions with activemerchant by using
Instant Payment Notification, which is part of paypal.
Once a user has subscribed to your subscriptions your rails
application will net a notification of the subscription, and then at
each billing period another notice and so forth. You application will
implement a controller that will handle the notices doing the
necessary book work for the notification. Do a search for
"activemerchant IPN" and you find examples how to do this.