require 'rubygems'
require 'rubygems' will adjust the Ruby loadpath allowing you to successfully require the gems you installed through rubygems, without getting a LoadError: no such file to load -- sinatra.
From the rubygems-1.3.6 documentation:
When RubyGems is required, Kernel#require is replaced with our own which is capable of loading gems on demand.
When you call require 'x', this is what happens:
If the file can be loaded from the existing Ruby loadpath, it is.
Otherwise, installed gems are searched for a file that matches. If it's found in gem 'y', that gem is activated (added to the loadpath).
The normal require functionality of returning false if that file has already been loaded is preserved.
See the documentation for Kernel#require to understand why this is necessary.
It is often superfluous. It will allow you to require specific versions of particular gems though, with the gem command.
As an addition to prior (and correct answers): Ruby 1.9 and newer ship with RubyGems built-in, so there is no real need to require 'rubygems'. Source here