I don't know about that Ruby/Gem, but your app registration is not correct.
You need to configure your app for explicit OAuth2, per this other answer, except enter localhost instead of example.com.
(The localhost is based on the original version of the question. If you have a registered domain, use that.)
Then, in your ruby code:
From this link: Gzip and deflate compression in curb http driver
You can set curl.encoding = '' to make curb auto decompress response body. Like below:
url_so = "http://api.stackoverflow.com/1.0/users/231917?type=jsontext"
curl = Curl::Easy.new(url_so)
# enables both deflate and gzip compression of responses
curl.encoding = ''