Better option is chef-solo + vagrant. That way, you can version all parts of the system, not just Ruby/Rails.

Is there a use-case outside of running ruby 1.8 and 1.9 at the same time?

I started using this last week to refactor a pile of legacy Ruby code. Gemsets per app is a godsend for that. You can disentangle the giant set of installed gems on your machine, figure out which ones are actual dependencies and which ones are only there because they were part of some crazy experiment six months ago, which ones are only there because they are dependencies of some other gem...

Gemsets for different apps, running MRI vs REE, and really you can run and switch from any flavor of Ruby (including JRuby) in an instant. It handles all the configuration and compilation for installation. Huge time saver, even if you are one of the few that only need one ruby version.

Sounds like a beastly equivalent of Python's virtualenv?

Beautifully, beautifully beastly :-)

If you have a few apps, it makes switching between so much easier. Best way to switch effortlessly between Rails 3 and Rails 2 apps.

If you're using a machine where you don't have root access it makes managing ruby installs and gem installs a lot easier.

it is huge for developing/maintaining a gem since you can run your tests easily across all sorts of ruby versions and gemsets