Cutting -- an ambiguous verb, which could mean it's exact opposite.

I'm not sure what you mean. Cutting and faceting precious stones is a manufacturing step in the production of gems of the quality needed for jewelry. It seems like a reasonable metaphor for finishing and releasing something called a "gem".

I get the pun, but it could mean that they were deprecating it, or dropping support.

Non-rubyist here. Can anyone explain in simple terms what this gem does? It looks like it provides you a copy of the jekyll gem, but users had that already with gem install jekyll.

It installs Jekyll, and its dependencies, which users would have done normally, but explicitly locks the version into the same version used on the GitHub Pages server, ensuring that your local build environment matches the GitHub build environment as closely as possible. This is especially important when new versions of Jekyll are released (often with new features) and the GitHub pages servers are updated. Builds in one environment may otherwise behave differently from builds in another.