The Gemfile is wherever you want it to be – usually in the main directory of your project and the name of the file is Gemfile.
It’s convenient to have one because it allows you to use Bundler to manage which gems and which versions of each your project needs to run.
If you are not using Bundler (which you should!), then you can just install any gems you come across with gem install X and ignore instructions about adding a line to your Gemfile.
Read more about it here:
- http://bundler.io/gemfile.html
- http://bundler.io/man/gemfile.5.html