Depends on the system. The default on Arch Linux is local gem installs:
$ cat /etc/gemrc
# --user-install is used to install to $HOME/.gem/ by default since we want to separate
# pacman installed gems and gem installed gems
gem: --user-install
That's a nice touch and some good work on the part of the package maintainer. Most (Ubuntu, RedHat, etc.) do not, they just expect you to sudo everything.