When compiling and installing rubygems it required the zlib module that wasn't installed in Ruby by default. To add in that functionality, go to the source Ruby directory, the ext directory, the zlib directory, then create the make file, then install it.

Make sure you have the proper library files before doing this (i.e. on Ubuntu its zlib1g-dev, installed via apt-get)

apt-get zlib1g-dev
cd /usr/local/src/ruby-1.8.6/ext/zlib
ruby extconf.rb --with-zlib-include=/usr/include --with-zlib-lib=/usr/lib
make
make install

The 'make' command should have all output lines NOT '...no'
If it does, then zlib1g-dev is NOT installed. Get it via the packages and redo this to create the makefile

After this return to the rubygems source directory and run:

ruby setup.rb

Wanna know what gems you have installed without looking at all the descriptions?

gem list | egrep -v "^( |$)"

Here's a (trimmed) sample output:

$ gem list | egrep -v "^ |^$"
*** LOCAL GEMS ***
actionmailer (1.2.1, 1.2.0, 1.1.5)
actionpack (1.12.1, 1.12.0, 1.11.2)
actionwebservice (1.1.2, 1.1.1, 1.1.0, 1.0.0)
activerecord (1.14.2, 1.14.1, 1.14.0, 1.13.2)
activesupport (1.3.1, 1.3.0, 1.2.5)
BlueCloth (1.0.0)
capistrano (1.1.0)
diff-lcs (1.1.2)