Topic: Installing rails

I keep getting this error when trying to install rails for the first time. I have X code installed, but I'm not sure what I'm missing.

calvin-bulthuiss-macbook-pro-5:~ calvineb$ sudo gem install rails
Building native extensions.  This could take a while...
ERROR:  Error installing rails:
    ERROR: Failed to build gem native extension.

/System/Library/Frameworks/Ruby.framework/Versions/1.8/usr/bin/ruby extconf.rb
mkmf.rb can't find header files for ruby at /System/Library/Frameworks/Ruby.framework/Versions/1.8/usr/lib/ruby/ruby.h

Gem files will remain installed in /Library/Ruby/Gems/1.8/gems/json-1.7.5 for inspection.
Results logged to /Library/Ruby/Gems/1.8/gems/json-1.7.5/ext/json/ext/generator/gem_make.out