Do you have the Xcode developer tools installed on Mac OS X? If not, I'd start there.
You can download them here: http://developer.apple.com/technologies/xcode.html
Once you've installed that, try again.
You need the mysql development libs to compile it. If you were on linux you could use "yum install mysql-devel". Not sure about how to get them installed on a mac, but try downloading the connector libraries from here: MySql Connector Downloads
You may have to pass in a --with-mysql-libs option to point to the directory when the C libraries are unpacked to. Hope this points you in the right direction.
Or you can just put the libraries in the default directory: /usr/lib64/mysql
I found this and worked out perfectly:
you can go to http://www.tmtm.org/en/ruby/mysql/ to download the tar file, and run the command below
# ruby ./install.rb
to install the mysql.rb